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What You Need to Know About Special Needs Trusts
Trusts are created by individuals or entities for the purposes of setting aside property or assets for a specific purpose, typically to benefit another person or group of people. A prime example is protecting a loved one with special needs. When the trust is established, either a person, multiple people or an entity is appointed to manage the trust assets. The person or entity acting in this capacity is known as the trustee and has the responsibility of making decisions in the best interest of the trust beneficiary.
Trusts are advantageous because they allow you to place conditions on how and when your assets will be distributed when you die while serving a multitude of different functions. In addition to controlling how the assets are distributed, trusts may be used to reduce estate and gift taxes, protect the benefits of a loved one who is disabled or has special needs while also providing them means for additional comfort, and trusts also allow you to skip the lengthy and expensive probate process.
Special Needs Trusts
Special needs trusts are a class of irrevocable trusts made specifically for the benefit of those with physical or mental disabilities. These differ from a typical trust due to the unique terms and conditions necessary to accommodate the specific needs and lifestyle of a beneficiary with disabilities. The trust is also designed to protect eligibility for government benefits due to increased assets.
Naming Your Trustee
Choosing the right trustee for a special needs trust is extremely important, and the trustee must be someone you are certain will act in your loved one’s best interest after your death. Often, they are a trusted family member who knows the beneficiary and their needs. They may also be a close friend or a non-profit organization that serves individuals with special needs. However, if your situation does not allow for this, the court will appoint a third party to manage the trust according to your written wishes.
Protecting Government Benefits
The trustee has complete control over the assets in the trust instead of the beneficiary. For this reason, government programs such as SSI and Medicaid ignore those assets when determining eligibility. Many people are unaware of this and make the mistake of distributing their assets to a loved one with special needs through a will. This could cause them to exceed the asset limits for SSI or Medicaid and jeopardize their benefits.
Special needs trust may also be set up to hold the proceeds from a legal settlement on behalf of the person with special needs. This is important to ensure a financial windfall does not negatively affect government benefits eligibility. Also, if the person with special needs is the one being sued, the funds in the special needs trust are protected from being paid out in damages.
Elder Law and Special Needs Attorneys Help Create Your Trust
Even if you believe your loved one with special needs will never need government benefits, it makes sense to consider a special needs trust. Special needs trusts can provide unique support to the beneficiary in ways that other types of trusts can not. They may require a lifetime of caregiving and financial assistance should something happen to you. Eventually, they may need to apply for government benefits, and they will be glad you provided them with options.
Special needs trusts can be difficult to set up, so consult an elder law attorney or special needs attorney who can examine your specific situation and make sure your loved one is taken care of for years to come.
Our elder law firm is dedicated to informing you of issues affecting seniors who may be experiencing declining health. Our elder law attorneys help you and your loved ones prepare for potential long-term medical expenses and the need to transition to in-home care, assisted living care, or nursing home care.
If you would like to speak with an elder law or special needs attorney regarding your situation or have questions about something you have read, please do not hesitate to contact our office at 1 (800) 680-1717. We look forward to the opportunity to work with you.
It’s great that this article talked about how understanding certain conditions could help provide the best estate planning protection. I remember when my father told me that he was planning to start estate planning to protect his assets and for proper estate management. He asked if I had any idea what would be the best planning option for a safe process. You did a great job of explaining the importance of estate planning. I’ll consult an estate planning advisory firm as they can help with the legal process.