Have you ever heard of a special needs trust? If you have a loved one with special needs, it may make an essential addition to your estate plan. Otherwise known as a “supplemental needs trust,” a special needs trust is a trust established for the benefit of a beneficiary with special needs. The structure and terms of the trust are such that the corpus of the trust is exempt from inclusion in the eligibility calculation for need-based, means-tested, government benefits such as Medicaid and Supplement Security Income (SSI). Learn more about how creating a special needs trust can help your loved one.
How Creating a Special Needs Trust Can Help Your Loved One
Many people with disabilities and special needs depend on government benefits for support. These programs are needs-based and, therefore, have strict asset and income limits for eligibility purposes. Providing resources and financial support to a loved one with special needs can easily jeopardize their continued eligibility for such programs. This means that, if you want to leave an inheritance to a loved one with special needs, you should do so carefully so as not to cause them to lose their government benefits as a result.
A special needs trust is the answer to the dilemma of wanting to provide support to a loved one with special needs without risking the loss of their government benefits. Put assets into a qualifying special needs trust and their benefits should be protected. It should be noted, however, that there are certain conditions that must be in place in order for a special needs trust to be effective at providing for your loved one without jeopardizing their government benefits. For instance, distributions from the trust should not be made directly to your loved one, but instead should come as in-kind provisions for them. Furthermore, distributions from the trust can only be for qualifying expenses.
Special needs trust distributions can only be used as a “supplemental resource.” Distributions cannot go towards expenses that are already covered by government benefits. This means that trust funds should be used for things other than food and housing, among other things. To cover your tracks, it may be worth it to have the trustee of the special needs trust retain receipts and track expenses covered by the trust.
The funds of a special needs trust can go towards greatly improving your loved one’s quality of life. While government benefits may cover the basics and the essentials, funds from a special needs trust can go towards things such as recreation, travel, and continuing education, thus allowing the beneficiary to experience continual personal growth and enjoyment. The trust can extend well beyond your own lifetime and provide for your loved one into the future. Additionally, the special needs trust structure gives added protection from creditors being able to go after the funds.
Estate Planning Attorney
Are you interested in learning more about the many benefits of a special needs trust? Talk to the knowledge estate planning team at BoyesLegal, APC for more info. Contact us today.