Posted by: Jennifer A. Johnson
In general, a trust is created when property or assets are managed by a person or firm for another person’s benefit. The person or entity who manages the trust is known as the “trustee” and is entrusted with the responsibility of making decisions in the best interest of the person who benefits from the trust, known as the beneficiary. Trusts are advantageous because they provide the ability to place conditions on how and when your assets will be distributed when you die, reduce estate and gift taxes, and allow you to skip the probate process.
Special needs trusts are a class of trusts made specifically for the benefit of those with physical and/or mental disabilities. These differ from the typical trust due to the special conditions that often need to be in place to accommodate the specific needs and lifestyle of the beneficiary of a special needs trust. Another one of the main reasons for having this type of trust is to ensure the beneficiary does not render him/herself ineligible for government benefits due to an increase in assets.
Choosing the right trustee for a special needs trust is extremely important and the trustee must be someone who understands the public benefit programs available to the beneficiary and who will act in the beneficiary’s best interest. Sometimes, this is a trusted family member who knows the beneficiary and his or her needs. Other times families look to a trusted professional or corporate trustee to serve as trustee.
One of the important features of a special needs trust is that the assets in the trust will not be counted toward asset thresholds contained in needs-based government programs such as Supplemental Security Income (SSI) and Medicaid. 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 assets in a trust when determining eligibility. Many people are unaware of this and make the mistake of distributing their assets directly to a loved one with special needs through their will. This could cause the disabled individual to exceed the asset limits for SSI and/or Medicaid, thus losing their benefits from these programs.
A special needs trust may also be set up to accept the proceeds from a legal settlement on behalf of the person with special needs. This ensures a windfall does not preclude the beneficiary from receiving needs-based government benefits.
Even if you believe your loved one with special needs will never need government benefits, it is still prudent to consider a special needs trust. Special needs trusts can provide for the unique and specific needs of the beneficiary in ways that other types of trusts cannot. Further, you never know what may happen in the future, especially when you’re no longer around. It may turn out that your loved one needs these government benefits one day and they’ll be glad you provided them this option.
Special needs trusts are an excellent vehicle to ensure your loved one with special needs is taken care of in the event of your passing. However, they can be difficult to set up and it is advised that you consult an elder law attorney who will be able to examine your specific situation and make sure your loved one is taken care of for years to come. If you would like to speak with an attorney regarding your situation, or have questions about something you have read, please do not hesitate to contact our office.
Our firm is dedicated to helping our clients and their loved ones work through issues and implement sound legal planning to address them. If we can help in any way, please don’t hesitate to contact our office at (630) 221-1755.