A special needs trust offers peace of mind for parents, loved ones p2
We are discussing special needs trusts and how such a trust can help to support a family member with a disability. Parents of a child with an intellectual or physical disability, for example, may wonder how to ensure the child's needs will be met, especially after the parents' death. A special needs trust would pay at least some of the costs of care.
An important advantage of a special needs trust comes into play when government programs are involved. Supplemental Security Income, Medicaid and similar government benefits have income and asset thresholds. Leaving a child enough cash to cover living expenses could disqualify him for those benefits. With a trust, the trustee, not the beneficiary, has control of the assets, and the government ignores them.
The funds for the trust can come from anyone and almost any source. In some cases, the beneficiary's own assets are used: a settlement or damages award from a personal injury lawsuit, for example. Or, an inheritance or gift received by the beneficiary may fund the trust. Another source could be child support payments or a divorce settlement. There are limits, though: Some income sources, including veteran's benefits and Social Security disability payments, may not be used.
The funds may also come from someone other than the beneficiary. This third party may be a family member, a friend or a complete stranger. And even if one person establishes the trust, other people can contribute to it. Typical sources of funds are personal checks or lump sum gifts; a trust may also be an heir to an estate or a beneficiary of a life insurance policy.
As we said in our last post, trusts are very flexible. Because a special needs trust can supplement (instead of diminish) Social Security disability and Medicaid benefits, though, the federal government requires that the trust agreement include certain language and some specific provisions -- information that we will not cover here.
These two posts are meant to be an overview of a special needs trust, an introduction to a tool that addresses key concerns regarding the continued care of a family member or friend with a disability. If you would like to learn more about this and other trust options, we suggest you contact an experienced estate planning attorney.
Source: Findlaw.com, "Special Needs Trusts FAQs," accessed Aug. 10, 2015