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Special Needs Trusts


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by Elizabeth Paily & Brett Johnson

Planning for the financial future of a child or loved one with special needs can be quite an estate planning challenge. While some individuals can assimilate into society and live somewhat independently, others will need constant assistance throughout their lives. In either circumstance, you want to know that funds for food, clothing, and other extras are available throughout their life, while not disqualifying them from also receiving government assistance.

A Special Needs Trust is a trust designed for beneficiaries who are disabled, either physically or mentally. It is written so that the beneficiary can benefit from the property held in the trust without making them ineligible for additional needs-based benefits from government assistance programs. So what do you need to know about setting up a Special Needs Trust?

First, why use a Special Needs Trust?

There are a variety of reasons that putting money into a Special Needs Trust for your loved one is preferred over leaving assets to them outright, say through your will. First and foremost, cash or assets left outright could leave the person with too many assets, thus disqualifying them from receiving assistance from government programs because they do not meet the “limited resources” requirement. This requirement states that the individual must not have more than $2,000 of “countable resources” to qualify for the assistance programs.

Countable resources are cash, liquid assets, land, life insurance, any additional vehicles other than one used for transportation, and any personal or real property that could easily be converted to cash and used to purchase food and housing, with a few exceptions. By allowing a Special Needs Trust to hold the assets for your loved one, they are not included as countable resources and may then allow them to participate and receive benefits from government programs.

Another reason that an outright inheritance might be discouraged is that the person may not be capable of handling the funds, either due to age or mental capacity. Without the protection of a trust structure and Trustee oversight, they could be vulnerable to those who might want to take advantage of them financially.

Second, who will be in charge of the trust assets?

A Trustee should be named when you establish the trust. The Trustee will be responsible for managing the assets of the trust and making distributions for the benefit of the beneficiary. When you establish the Trust, you can also provide a list of instructions indicating how you want your loved one to be cared for and also naming an advocate, in addition to the Trustee. An advocate would be someone who has a good understanding of your intentions for the care of your loved one and can work hand-in-hand with the Trustee to meet the needs of the beneficiary.

Third, how should to get started?

There are numerous legal requirements surrounding the establishment of a Special Needs Trust. To ensure that the proper guidelines are met, it is very important that you work with an attorney who specializes in this area. They will also be able to discuss your options for funding the trust during your lifetime or after your death. If you have a loved one with special needs, the ultimate goal is to make sure their needs are met financially long after you are gone. The Special Needs Trust is a wonderful way to achieve that goal. Please call us if you would like more information on these trusts or to discuss your estate plan in general.

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