Special Needs Trusts

Special needs trusts are a great way to help provide for someone with disabilities without jeopardizing his or her access to public benefits programs. If you have a disabled family member under the age of 65 you may want to think about including a special needs trust in your estate plan.

What is a Special Needs Trust?

A special needs trust is a specific kind of trust where the federal government allows qualified people to hold assets and the assets will not affect eligibility for Medicaid and certain other need-based government programs. Special needs trusts differ from other kinds of trusts in a few important ways. First, the trust must be for a person under the age of 65 who federal law qualifies as “disabled.” Second, the trust must be created under one of several specific state or federal statutes that allow the creation of the trusts. Third, the grantor must be one of a few select people and the beneficiary cannot be the trustee. Finally, there must also be provisions of the trust that state that after the death of the beneficiary the state must be reimbursed.

Special needs trusts can be funded by a third party, such as a parent or grandparent. Self-settled special needs trusts are also permitted under a specific section in case the beneficiary receives an inheritance that was not put into a special needs trust, gets a large lawsuit settlement, or has other assets that he or she wants to be set aside.

One of the biggest limitations of a special needs trusts is that the assets in the trust are not allowed to be used for the general support of the disabled individual, but rather for his or her “special” needs. These needs include anything that public benefits will not cover.

Pros and Cons of Special Needs Trusts

There are many things that you need to consider to decide whether a special needs trust is right for you. Like most things, there are both benefits and drawbacks. One of the biggest benefits is that it securely provides for the needs of a disabled loved one while preserving Medicaid eligibility and eligibility for other benefits. However, the assets in the trust can only be used for the supplemental or special needs of the disabled individual. The biggest drawback to special needs trusts are that after the death of the disabled person the remaining assets first go to the state to reimburse it for the benefits paid out on the disabled person’s behalf. That will usually wipe out the remaining funds so there is no money left over for beneficiaries of the disabled person’s estate.

Contact Us for Help Today

If you are thinking about setting up a special needs trust, or are thinking about planning your estate, you should talk to a knowledgeable estate planning attorney to talk about which estate planning tools are right for you. Our experienced estate planning attorneys at The Villages in Florida can help you to figure out whether a special needs trust is right for you.

Resources:

floridabar.org/divcom/jn/jnjournal01.nsf/c0d731e03de9828d852574580042ae7a/a2c00e5a939e0372852572ca004ced0b!OpenDocument&Highlight=0,*

specialneedsalliance.org/wp-content/uploads/2016/04/2016-Handbook-for-Trustees.pdf