The Power of a Special Needs Trust

 Posted on September 07, 2016 in Estate Planning

As you look ahead to a time when you will no longer be around to care for your loved ones, you have probably given a great deal of thought to those who rely on you the most. You may have a son or daughter or even a sibling with a disability or other types of special needs who is unable to care for him- or herself. While you may have been able to care for a loved one with special needs during your lifetime, providing for him or her after your death could present significant challenges and may require you to establish a special needs trust in your loved one’s name.

What Is a Special Needs Trust

A special needs trust, sometimes called a supplemental needs trust, is a tool that can allow the assets placed under the trust to be used for the care of a person with a disability or special needs without affecting his or her eligibility for government assistance programs. Special needs trusts are often funded by large, lump-sum settlements or through gifts and inheritances. Without a properly-drafted special needs trust, leaving part of your estate to a loved one with disabilities could potential disrupt the delicate balance of government aid programs upon which he or she relies.

Income and Resource Limits

Many sources of government-funded aid are limited to those of a certain income level. Supplemental Security Income, Medicaid, and housing subsidies, for example, require a disabled individual to meet income and resource criteria. Some programs also maintain an exhaustive application process that may take months or years to fully complete. If your loved one has already gone through the process of applying and qualifying for specific programs, simply leaving him or her significant assets in the form of cash or property could present a myriad of problems.

Illustrative Example

Assume you allocated $100,000 to a special needs family member in your will without using a trust, but his or her medical care—without government aid—costs about $50,000 per year. Not accounting for taxes or any other expenses, the inheritance would last for a mere two years, but would likely disqualify him or her from receiving government assistance. Once the money ran out, he or she would be required to begin the application process all over again to restore the benefits he or she needs.

If you used that $100,000 instead to fund a properly-drafted special needs trust, your loved one could continue to receive the benefits for which he or she has already qualified. The inheritance from you could then be used to supplement the income and help from the government, allowing your family member to enjoy a much higher quality of life.

Contact an Estate Planning Lawyer

There are specific rules and regulations that must be followed when creating or using funds from a special needs trust, and an experienced Lombard estate planning attorney can help you work through the process. Call A. Traub & Associates today to get the answers you need to whatever questions you may have about wills, trusts, or other estate planning tools. With three convenient locations, we are ready to help you protect your family’s future.

Sources:

http://www.americanbar.org/newsletter/publications/law_trends_news_practice_area_e_newsletter_home/0501_estate_financialplanning.html

http://www.americanbar.org/content/dam/aba/publishing/rpte_ereport/te_lewis.authcheckdam.pdf