A special needs trust, also called a supplemental needs trust, holds and protects financial assets for the benefit of a specified disabled beneficiary. There are countless reasons to select a special needs trust for the financial well-being of someone you love with special needs. Here are three of the most common for you to consider.
Having a Trustee in Place
One of the main benefits of a trust is having a trustee oversee the distribution of assets and manage investment decisions. For example, suppose your beneficiary is unable to manage finances independently. In that case, the trustee has the vital role of managing the assets and administrating spending decisions. The trustee must also ensure that assets are used according to the original intentions of the trust.
However, choosing a trustee can be challenging. It’s not always best to use an older sibling or another family member. Seeking the advice of an experienced attorney can be helpful to identify who might be the most prepared to fulfill all the duties of the trustee. You should also name a successor trustee in case your first trustee choice isn’t available to serve.
Generally, the trustee will add to the beneficiary’s government benefits but not enough to replace them. The beneficiary often has supplemental needs that aren’t covered by Medicare or Medicaid, such as costs for sitters, companions, and dental or medical expenses.
Maintaining Government Aid
Unfortunately, many well-meaning family members make the mistake of selecting a disabled family member as a beneficiary in their will. This is a disadvantage to the disabled person because it will likely disrupt their government support. If the assets left to them exceed $2,000 in value, they could cause the disabled person to become ineligible for government assistance programs.
Many government programs such as Supplemental Security Income (SSI), Medicaid, and other services such as job training and subsidized housing have income restrictions. Since disabled individuals often have a limited ability to earn money from other sources, disrupting any stable income stream might be risky.
To protect the beneficiary and prevent this from happening, grantors can place life insurance benefits or an intended inheritance in a special needs trust instead. With this, you can provide financially for them in a way that might increase a beneficiary’s quality of life without risking their government monthly income or other services that may be their primary or single reliable source of financial support.
Protect Assets from Creditors or in Divorce
Even if your loved one doesn’t qualify for SSI or other government assistance programs, you may still want to use a special needs trust to protect their financial assets. Such a trust can prove successful in protecting assets if the beneficiary were ever sued by a creditor or other party or in divorce proceedings.
Special needs trusts have many benefits and can accomplish several goals. If you have questions about one or are considering setting one up, speak to a knowledgeable attorney today.