How Can a Special Needs Trust Benefit a Loved One?

 Posted on September 30, 2024 in Estate Planning

There are many types of trusts that can benefit a wide variety of situations. The special needs trust is one of these. In the past, parents with a disabled child were often forced to disinherit the child so government benefits could continue. The only other option was to leave money in a traditional trust with crossed fingers, hoping it would be properly used for the care of the disabled child.

Today, a special needs trust allows the disabled child to continue receiving necessary government benefits while still having money to increase their quality of life and cover any extra expenses. A special needs trust can be used for a person with physical or mental disabilities or a person with a mental illness. The laws that govern special needs trusts in Illinois can be found under Section 760 ILCS 5/15.1. If you believe a loved one could benefit from a special needs trust, a Lombard, IL estate planning attorney from A. Traub & Associates can help.

How is a Special Needs Trust Beneficial for a Disabled Person?

As a legal arrangement specifically designed to benefit a disabled person, a special needs trust can provide financial support without affecting the person’s eligibility for public assistance programs, including SSI and Medicaid. The special needs trust is meant to enhance the life of an individual with a disability by isolating assets within the trust, thus preventing those assets from being "counted" against the disabled person’s eligibility threshold.

What Is a Self-Settled Special Needs Trust?

A self-settled special needs trust is established by a grandparent, parent, or legal guardian for the benefit of a disabled person under the age of 65. When the beneficiary dies, the funds remaining in the trust must be paid to the state for any Medicaid received. If there is a balance remaining, the settlor can disburse those funds.

What is a Pooled Special Needs Trust?

A pooled special needs trust is for the benefit of a disabled person of any age and is funded by assets that belong to the disabled person or assets the disabled person would be entitled to receive at any age. Like the self-settled special needs trust, the pooled trust is created by the disabled person's parents, grandparents, or legal guardians or by the disabled person himself or herself. The funds are pooled for investment purposes, but each disabled person has his or her own individual account.

What is a Third-Party Special Needs Trust?

Like a pooled special needs trust, a third-party special needs trust can be used for a disabled person of any age. The trust is established by someone other than the person with a disability. The assets of the settlor fund the trust. Once the disabled beneficiary dies, any remaining funds in the trust revert to the settlor rather than being paid back to the state for Medicaid services.

What Are the Steps Involved in a Special Needs Trust?

Your estate planning attorney will guide you through the process of establishing a special needs trust, but the process essentially involves:

• Choosing the type of special needs trust that is most beneficial for your disabled loved one.

• Having the special needs trust document drafted to reflect the specific intent of the trust.

• Selecting a trustee who will act in the best interests of the disabled person while remaining compliant with all laws.

• Funding the trust with assets that may be in the form of cash, stocks, real estate, or other valuable assets, depending on the purpose and benefits of the trust.  

Contact a DuPage County, IL Special Needs Trust Lawyer

Estate plans that include trusts are a bit more complex and can benefit from a highly skilled Wheaton, IL special needs trust attorney from A. Traub & Associates. While we are a large firm, we pride ourselves on our personal, friendly approach. We tailor estate planning solutions for each client, specifically to his or her individual circumstances and goals. Call 630-426-0196 today to schedule a consultation to discuss your estate planning needs.