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Estate Planning & Elder Law Blog

Friday, February 22, 2019

Q & A: 5 Frequently Asked Questions About Special Needs Trusts

Are you thinking of signing over money or assets to a loved one with special needs? 

People often choose to do this by naming them as beneficiaries in a will. While this may seem like a good idea, it can have financially devastating consequences.

In fact, it can disqualify them from government programs, meaning they lose the financial and medical support they previously relied on. 

Special needs trusts provide a way around this.

In this post, we'll tell you how they work.

 

Things You Need to Know About Special Needs Trusts

Here's how this type of trust can protect a beneficiary with disabilities. 

 

1. What Are the Benefits?

These types of trusts give you an extra layer of protection, ensuring that the beneficiary can acquire and maintain the level of support they need. Unlike a will, they give you the ability to dictate the way your money is spent. 

 

2. How Can a Beneficiary Access their Trust?

Giving a loved one with special needs money directly can complicate issues in a number of ways. However, doing it through a trust doesn't mean that it's difficult for them to access it. 

If they choose, they're able to use those funds for recreational use, as well as to pay for personal care, medical expenses, accommodation, education and transport.

 

3. What Should Be Included?

It's important to go through your trust thoroughly to make sure it covers all the bases. In order to be legally watertight, it has to include specific language.

First of all, it needs to state that it's intended to provide "supplemental and extra care" rather than basic support. This clarifies that it funds extra services that the government won't provide to the trustee. 

The trust should also explain that its an exception to the Omnibus Budget and Reconciliation Act, and include any provisions from the United States Code. 

Finally, there should also be information regarding the Medicaid payback process.

 

4. How Do They Affect Government Assistance?

Inheritance of anything over $2,000 can cause a disabled person to lose government benefits. This means they'll no longer have access to subsidized housing, Supplemental Security Income or Medicaid. 

A special needs trust allows you to leave them money without the risk of disrupting their current support. This is because they address the complicated needs of each individual, separating their funds from their income.

 

5. What Options Do I Have?

There are two main options you can choose from.

The first is a first-person trust, which makes the beneficiary completely liable in the instance of another legal settlement, such as inheritance or a compensation claim.

The second is a third-party trust, which gives parents or guardians more control over their funds. The money is used to secure the care and support their loved one needs, and anything outside of that can be allocated as they wish. 

 

Call the Experts

Special needs trusts are complicated, and setting them up requires lots of specific legal knowledge.

That's why you should hire an attorney to help you.

They'll guide you through the entire process, handling all the paperwork and explaining the legal jargon to make it easy for you. 

Take the first step by booking a legal consultation.





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