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A special needs trust is a legal tool designed to both hold and protect assets for the benefit of a disabled beneficiary. The structure of a special needs trust allows both a special needs individual, as well as family members and loved ones, to contribute assets and other resources to the trust and have them managed for the benefit of the special needs individual. Sometimes, a special needs trust is established in the estate plan of a parent who wishes to fund the trust with assets or life insurance proceeds upon his or her own death as opposed to giving an inheritance outright. Here, we will review the benefits of establishing a special needs trust.
The Benefits of a Special Needs Trust
One of the central benefits of a special needs trust is one of the main reasons why they are established in the first place. A special needs trust allows family members and loved ones to provide financial support to a disabled individual without jeopardizing the continued receipt of much-needed government benefits. Giving assets or leaving an inheritance to a disabled individual outright could disrupt the receipt of government support. Government assistance programs are often need-based. It would not take much in the way of financial support to render a person ineligible for these often critical benefits. When assets are put into a special needs trust instead of given to a disabled person outright, they are generally not includable in the eligibility calculation for programs such as Medicaid and Supplemental Security Income (SSI).
This is why a special needs trust is often referred to as a supplemental needs trust. The assets held in the trust for the benefit of a disabled beneficiary are not intended as a substitute for government benefits, but instead, provide supplemental support for things not covered by government benefits. Trust funds can be distributed for purposes of things like entertainment, education, and other things, but not for basic needs covered by government benefits.
Another benefit of a special needs trust is the fact that a trustee is appointed to both manage the investment of trust assets as well as overseeing the proper distribution of trust assets so that they are made in a way that will not jeopardize government benefits. Giving an outright inheritance or gift to a special needs individual can not only be problematic because of the jeopardizing of government benefits, but the individual may be unable to independently manage his or her own finances. The structure of the trust innately provides a solution to this problem. The trustee is tasked with managing the trust and distributing trust proceeds according to the intentions of the trust.
An added benefit of a special needs trust is that it shield assets from creditors. Should the beneficiary ever be sued, the trust will act as a shield and protect the assets held within the trust from the reach of creditors.
Estate Planning Attorneys
For more information on special needs trusts and other valuable estate planning tools, talk to the knowledgeable attorneys at CDH Law. We are committed to helping our clients develop comprehensive estate plans that meet their unique needs and that of their loved ones. Contact us today.