How a Special Needs Trust Can Protect a Disabled Loved One

 Posted on June 29, 2018 in Estate Planning

When you consider what life will be like for your loved ones when you are not around to care for them, you may have serious concerns about family members who rely on you for the most care. You may have a child, a sibling, or even a cousin with a disability or other special needs. These needs may leave the person unable to adequately look after themselves. If you have been caring for a person with special needs, your death could lead to serious challenges for him or her, and your best option may be to create a special needs trust in the name of your loved one.

A Powerful Tool

Also known as a supplemental needs trust, a special needs trust is an instrument that places assets under the care of trustee to be utilized to help provide for a person with special needs. The most unique aspect of a special needs trust is that the funds contained in the trust are not considered to be “available assets” for the disabled individual, which means they cannot impact the person’s eligibility for Medicaid, Supplemental Security Income (SSI) and other income-based government programs.

Many special needs trusts are funded by means of lump-sum injury settlements and through inheritances and gifts. Leaving substantial assets to a disabled loved one outside of a special needs trust could stop him or him her from getting the government aid on which he or she may depend.

Asset Limitations

Many government aid programs are reserved for those whose income and available assets are below a certain threshold. For example, SSI, Medicaid, and most housing subsidies have income and asset criteria that must be met. Many of these programs also have extensive application processes that often take several months or years to complete. This means that if your disabled family member has already undergone the application and qualifying process, allocating him or her a direct inheritance could cause a whole host of issues.

Picture a situation in which you are wanting to leave your family member with special needs an inheritance of about $150,000. Now assume that if he or she did not receive government assistance, his or her medical bills and the costs of care add up to about $60,000 per year. Without even discussing taxes, groceries, or other costs, a direct inheritance would last about two and half years and would probably make the person ineligible for government aid. When the money runs out, the individual would have to start the application process again.

On the other hand, if you put that $150,000 into a special needs trusts created with the help of a qualified estate planning attorney, your family member would continue receiving his or her benefits. Your money could be used to provide for other needs that the government programs do not cover, such as home modifications and travel expenses to and from specialists.

Speak With a Trusts Attorney

A special needs trust must be created and funded following very specific rules and guidelines. Contact an experienced estate planning lawyer in Lombard to get the help you need throughout the process. Call 630-426-0196 to get started today. We are ready to help you provide for your family for many years to come.

Sources:

http://www.americanbar.org/content/dam/aba/publishing/rpte_ereport/te_lewis.authcheckdam.pdf

https://www.cnbc.com/2017/10/25/how-to-set-up-a-special-needs-trust.html