You’ve likely heard of a special needs trust, but do you know what it is and how it’s used? Here are ten truths about these important estate planning tools. A special needs trust is used to help ensure a disabled beneficiary not only receives what he needs in the form of government benefits, but also to provide a high quality of life. It should never be an “either/or” dynamic. If you’re worried about the future needs of a loved one, this just might be the vehicle of choice that provides the necessary protection for that person and peace of mind for you.
Of those with disabilities of any kind, many are unable to maintain employment. Often, they rely on Medicaid and SSI, and too many times, those resources are inadequate due to strict limits on the amount of resources an individual can have in their name. This is where a special needs trust can play an important role.
A properly drafted special needs trust holds certain assets that aren’t considered in the qualification of some government benefits, such as Medicaid and SSI. The disabled individual is the beneficiary of the trust during his or her lifetime. Of course, there are those who oversee the trust, which is explained below.
There are a number of uses that aren’t allowed with a special needs trust, but often, these are those needs met in different government programs. Expenses for vacations, education, medical expenses, personal care attendants, and many more goods or services that benefit the individual are allowed.
The funds in a special needs trust are not subject to creditors or seizure.
The maximum dollar amount in countable resources that a disabled person can own without jeopardizing his Medicaid or SSI coverage is $2,000. Speak with an experienced estate planning attorney for details on countable resources; a minor overlook can cause problems.
A special needs trust is different from a self settled trust. In these types of designations, there exists a clause that requires any remaining assets in a trust after the beneficiary’s death be used to repay Medicaid or any other costs associated with the care of the recipient. In a special needs trust, the remaining assets can be passed to an heir.
Special needs trusts aren’t limited to minimums and maximums in terms of dollar amounts.
A trustee manages the special needs trust and may be a relative, trusted friend, estate planning lawyer, bank, accountant or nearly anyone else acceptable to the beneficiary.
While they’re often used to protect minor children, they’re also a great way to ensure assets are earmarked for adults as well.
If a trust is properly established and funded, though the trustee is dishonest or improperly spends the income or principal of the trust, the public benefits of the beneficiary could be in jeopardy and could even be rescinded.
As you can see, there are many benefits and reasons for establishing special needs trusts. Aside from the peace of mind they offer, they’re really strong financial tools with benefits that far outweigh any downside. If we can help you establish a special needs trust, we encourage you to contact our office to explore your options for protecting a loved one.