For decades, people have used trusts to give money to loved ones. One reason trusts stand the test of times is that there is a trust to fit (almost) every occasion. For example, if you need ultimate flexibility, a revocable trust allows the funder to revoke or change the trust at any time. On the other hand, a testamentary trust is written into one’s will and is only created upon the happening of a certain condition (such as having children under a certain age at the time of your passing). Today, we will discuss the special needs trust.
What Is a Special Needs Trust?
As the name implies, a special needs trust is a trust that can only assist a disabled beneficiary. These types of trusts are “irrevocable,” which means they cannot change once they are in effect.
How Do Special Needs Trusts Work?
Special needs trusts are just like all other trusts in the sense that people are named to three important roles. First, we have the grantor of the trust: the grantor of the trust is the person who funds the trust, often wishing to gift money or assets to the person in the second role: the beneficiary. In the case of a special needs trust, the beneficiary is someone with special needs or a qualifying disability who is receiving (or will receive) government benefits such as Social Security or Medicaid. Third, we have a trustee--the person or entity who carries out the terms of the trust and administers it in accordance with the law.
Put simply, the grantor gives, the trustee manages, and the beneficiary receives.
Why Create a Special Needs Trust?
If property drafted, assets in a special needs trust do not impact the beneficiary’s eligibility for government programs. This is important because, as you are likely aware, government programs such as SSI and Medicaid impose a limit on an applicant or recipient’s countable resources. For example, to qualify or continue receiving SSI, a person must have less than $2,000 in countable resources. Because assets in a properly-drafted Special Needs Trust are not counted, the beneficiary remains eligible for such programs.
Need Assistance in Creating a Special Needs Trust?
If you want to help a special needs loved one but aren’t sure where to begin, please feel free to schedule a free consultation with Chestnut Hill Legal.
Call (610) 991-7986 now for a free consultation concerning your estate planning needs.