When thinking about estate planning, you need to consider the unique position and circumstances of your family and loved ones. For instance, do you have a loved one with special needs? You may, of course, want to provide financial support for them. While the intention behind this is great, giving financial gifts or leaving outright inheritances for individuals with special needs may actually end up doing more harm than good. These types of asset transfers can all too easily risk the person’s eligibility to receive government benefits like SSI and Medicaid. If you have a loved one with special needs, you should consider establishing a third-party special needs trust.
Should You Establish a Third Party Special Needs Trust?
A third-party special needs trust is one funded by someone other than the person with special needs. That is why it is called a “third-party” special needs trust. The trust is funded by a third party for the benefit of the beneficiary with special needs. When properly funded and structured, a special needs trust allows a person to provide financial support to someone with special needs without that financial support jeopardizing the beneficiaries’ continued receipt of government benefits.
The financial support provided by the special needs trust is not counted for purposes of calculating government benefit eligibility for programs such as SSI and Medicaid. It is, as stated previously, important that the trust is properly funded and that disbursements from the trust are appropriate. Improper distributions from the trust may end up counting against the beneficiary and risk loss or reduction in government benefits received.
If you want to provide support for a loved one with special needs, one that will help the loved one cover supplemental expenses and improve his or her quality of life without risking government benefit eligibility, then a special needs trust is a good way to go.
In establishing the trust, be sure to select a dependable trustee that will properly follow the instructions of the trust. Again, improper trust distributions will risk continued receipt of government benefits. This means cash distributions from the trust directly to the trust beneficiary are rarely a good idea. Instead, distributions from the trust to directly cover supplemental expenses, those that are not covered by government benefits, are the safest route to go.
Estate Planning Attorney
Special needs trusts can prove invaluable to those with special needs. Unfortunately, many people are not aware that such a mechanism exists to provide financial support to a loved one with special needs without having to worry about jeopardizing their continued receipt of government benefits. At Verras Law, we develop comprehensive estate plans that take into account the uniqueness of each of our clients and their families. We will go over your planning options and help maximize the legal tools available to you to help maximize your goals for yourself and the ones you love. Contact Verras Law today.