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Four Things to Know About Special Needs Trusts in Illinois

 Posted on April 13, 2021 in Estate Planning

Lombard special needs trust lawyerIf you are considering ways to provide for a loved one with special needs, you have probably discovered the inherent conflict with giving money directly: Any funds you contribute could make this individual ineligible for benefits under the Social Security SSI program, Medicaid, and other forms of public assistance. Your heart may be in the right place, but you could be doing more harm than good when it comes to qualifying for needs-based programs that focus on income and assets.

With this information in mind, you may have also come across special needs trusts when researching ways to provide support. In short, this legal structure allows you to place funds in a trust managed by a trustee who makes permissible distributions that enable your loved one to still qualify for public programs. An estate planning lawyer can help with the details specific to your case, but you might benefit from knowing a few basic things about special needs trusts.

Creating a Third-Party Special Needs Trust

You establish a third-party trust when you make the arrangements for a disabled beneficiary, often by appointing yourself as trustee. A first-party special needs trust would be one created by the person with special needs, such as when he or she received a settlement or inheritance. The distinction is important, since a first-party trust must pay Medicaid back when the beneficiary passes.

A Special Needs Trust Serves Multiple Purposes

You could create a special needs trust through your will, but that means it does not exist until you die. As a result, other individuals cannot contribute. By establishing a stand-alone trust during your lifetime, with yourself as trustee, you can accept gifts from grandparents and other relatives. All of these funds would be exempt from being considered for purposes of Medicaid, SSI, and other programs.

Be Careful With Distributions

To preserve the beneficiary's eligibility for public assistance, the trustee is only allowed to make permissible distributions for dedicated purposes. By giving cash or the equivalent, the trustee could put the beneficiary over the qualifying income threshold. Permissible distributions would be amounts for:

  • Food, lodging, utilities, and transportation

  • Personal items, including clothing, shoes, and toiletries

  • Furniture, appliances, linens, and other household needs

  • Medical costs not covered by other sources

  • Many other amenities that serve the best interests of the beneficiary

Appoint a Successor Trustee

Many parents create a third-party, stand-alone special needs trust for their disabled child, naming each other as co-trustees and/or successors. You should also appoint a successor trustee to step into the role to ensure a seamless transition in the event that a trustee dies or becomes incapable of serving.

Contact a DuPage County Special Needs Trust Attorney

This information may be useful as an overview of special needs trusts in Illinois, but there are numerous details and requirements that you should entrust to an experienced Lombard, IL estate planning lawyer. For more information, please call A. Traub & Associates at 630-426-0196. We can schedule a consultation to review your circumstances and advise you on options.


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