Special Needs Trust
A problem which many families face today is how to pass an estate when a beneficiary may have special needs or disabilities which prevent that beneficiary from being able to manage such a gift for themselves. Additionally, in many instances, beneficiaries who are currently benefitting from one or more governmental resources would lose such benefits if they were suddenly to inherit from their parents or grandparents.
In these instances, we recommend the use of a Special Needs Trust for the beneficiary. This type of trust withholds the distribution/gift from the beneficiary so no governmental source may claim that the beneficiary actually has possession or ownership of the property and such can never be counted against them as being a true asset.
This not only maintains the beneficiary’s eligibility for their government benefits but also protects the beneficiary by using a trusted manager (trustee) who has the beneficiary’s best interests in mind.
This planning is important on a multi-generational level. A scenario that has come up in the past is where the Settlor of the trust has two children, one of whom has a special needs child (grandchild). The Settlor simply leaves their estate to be divided equally between their two children, but unfortunately one of their children pre-deceases them – the child with the special needs grandchild.
Since the Settlor’s trust was written prior to the birth of the special needs child, the grandchildren of their deceased child inherited equally. The special needs child had all his inheritance go to the state for reimbursement and the child no longer qualified under the programs he presently enjoyed.
If your family has these special circumstances, please see us for a discussion as to how we can set up the Special Needs Trust for the benefit of the beneficiary, allowing for their incidentals to be protected while maintaining their eligibility for their governmental programs.
Frequently Asked Special Needs Trust Questions
What is a Special Needs Trust and why would my family need one?
A Special Needs Trust is a legal arrangement that allows you to leave assets to a disabled family member without jeopardizing their government benefits. It works by keeping inherited assets separate from the beneficiary’s direct ownership, ensuring they maintain eligibility for crucial government assistance programs while still benefiting from their inheritance. While not limited to, a Special Needs Trust is most commonly used for persons who are developmentally disabled.
How does a Special Needs Trust protect government benefits?
A Special Needs Trust protects benefits by preventing inherited assets from being counted as the beneficiary’s personal resources. The trust is managed by a trustee who can use the funds for supplemental needs while keeping the beneficiary eligible for programs like SSI, Medicaid, and other support systems such as housing and food assistance programs. This arrangement ensures the inheritance enhances rather than compromises their support system.
What happens if I don’t set up a Special Needs Trust before passing assets to a disabled beneficiary?
Without a Special Needs Trust, a disabled beneficiary who inherits assets directly may lose their government benefits and have to use their inheritance to pay for basic care until the funds are depleted. Once exhausted, they would need to requalify for government assistance, potentially facing gaps in crucial services and support.
When is the best time to set up a Special Needs Trust?
The best time to set up a Special Needs Trust is as soon as you know you have a disabled beneficiary who might inherit assets from you. Early planning prevents scenarios where an unexpected death leads to direct inheritance that compromises benefits. Regular review and updates ensure the trust continues to meet changing family circumstances and legal requirements.
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