Editor's Note: This article is part of the Financial Advisor series "How I Solved It." Advisors describe a client with a problem and what they did to help.

"It was my biggest, knottiest situation because of my personal, emotional investment," reflected Chris Price, assistant vice president of advanced sales and business development at Lincoln Financial Group.

Price was recalling a recent financial conundrum involving his own family. "My brother was born with several intellectual challenges, along with some physical issues including diabetes and Parkinson’s disease," he explained, citing paranoid schizophrenia and bipolar disorder as among his brother's illnesss.

Needless to say, the brother required a great deal of daily supervision. This was handled primarily by Price's parents. "For his entire life, my brother lived at home, and efforts to place him in halfway and other supportive living arrangements failed," said Price, who is a Radnor, Pa.-based chartered financial consultant with a law degree, among other credentials.

For him, the challenge was getting his parents to plan for his brother's future—and their own. "My father’s solution was to invest his pension money in 100-to-1 stock long shots. You can imagine how that worked out," chuckled Price with a sigh.

Only after his mother died could Price convince his father to take more constructive action. Specifically, he had him set up two separate special-needs trusts. A special-needs trust, of course, sets aside assets for a beneficiary who has ongoing custodial expenses but, in many cases, can't handle managing money on his or her own. It also shields a portion of those assets to allow the recipient to collect appropriate government benefits.

But why two trusts? "One was a self-settled trust. This allowed for my brother to transfer financial assets that were in his name to the trust, and to subsequently use those assets to enhance his lifestyle without Medicaid requiring him to spend them down," said Price.

A self-settled trust is one that's funded by assets from the beneficiary—i.e., the benefactor and beneficiary are the same person. But by transferring his own assets into one of these trusts, the brother didn't have to worry about exceeding the savings threshold for Medicaid consideration, which is just $2,000. Anything more than that and he would've jeopardized his federal benefits. Technically, though, a self-settled special needs trust must be established by someone other than the beneficiary—such as a parent or the court, who effectively orders the beneficiary to pay a lump sum directly to the trust.

"This type of trust is generally available to individuals who are disabled before age 18," said Price.

The second special-needs trust was created as part of the father’s will, to be funded only after the father passed away. Price and his other siblings agreed to forgo their inheritance so that all of the father's assets could go into this trust upon his death.

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