Being a parent or guardian presents its challenges, but being the parent or guardian of someone with special-needs can be uniquely challenging, especially when planning for their future.
A Special-Needs Trust is a form of estate planning that concentrates heavily on the special care and needs of our loved ones with disabilities while keeping them eligible for government benefits, such as Supplemental Security Income (SSI), Medicaid, etc.
Because of the limiting nature of government-provided benefit programs and any possible additional care that the beneficiary may require, it has become an essential aspect of estate planning to specify a Special-Needs Trust to ensure that your loved ones are taken care of, be it now or after your passing.
In this article, we will delve into the complexities of such documents. While this article will provide general information on the subject of trusts in the state of Utah, we suggest a legal consultation to fine-tune any issues that may be unique to you and your needs.
How Do I Make It, and Why Do I Need a Special-Needs Trust?
Special-needs trusts can be established several ways, depending on your particular circumstance. Whether it be from a living trust or a will, a special-needs trust can be vital in guiding your loved one’s financial, legal, or special care needs when formed and handled correctly. Establishing a special-needs trust allows you to leave an inheritance to your loved one without risking the benefits entitled to them through the government.
Even a relatively small endowment, incapable of paying for their long term needs, could potentially risk benefits required for their day to day lives. SSI, Medicaid, vocational training, and even housing are determined through means-testing using asset limits created to be very difficult to maneuver around.
A mean test is an investigation into an individual’s circumstances to determine if they should get the benefits that may or may not be vital to their livelihoods; asset limits are the hurdles that could stop them. In the event of inheritance, regardless of its nature, it can jeopardize the access your loved ones have to those programs as it adjusts the circumstances of their resources, even if the inheritance is not enough to cover the needs that the programs would cover.
2 Types of Special-Needs Trusts And What They Mean
While there are quite a few different types of trusts, each with its individual purpose and nature. Today we will be covering the most common special-needs trusts (SNT) and discussing which will help you the most in providing the security and peace of mind you and your loved ones deserve. A SNT is an effective way to secure a future for your disabled loved ones, and comes in a few flavors.
1. First Person or Self-Settled Trust
Whether created directly by the beneficiary or done on their behalf, a “self-settled” special-needs trust is based on the objective of getting or keeping one’s eligibility for public benefits.
Typically the trust’s funding would come from an inheritance, but can also come from lawsuit proceeds or even lottery winnings.
A self-settled trust is a payback trust; therefore, a provision must be included to direct the trustee(s) to refund the state Medicaid program for anything it has paid for the now-deceased beneficiary from any remaining funds held in the trust up to the amount contributed. In most states, the regulations that decide the distributions for self-settled special-needs trusts are remarkably more complex and limiting than those controlling third-party special-needs trusts, which we will discuss next.
2. Third-Party Trust
Created by a parent, guardian or any third party and using funding provided by them, a third-party special-needs trust uses assets that never belonged to the beneficiary directly. With careful planning, a third-party trust can be used for inheritances or even gifts that may otherwise risk reducing or eliminating certain government benefits.
Often times the rules of a living trust or will govern this type of special-needs trust and does not require the payback provision seen in the self-settled trust, and the payments tend to be more flexible, if not downright generous.
Dealing with death and planning for what comes after can be difficult and uncomfortable, but it doesn’t have to be. With ProvenLaw, you can work through these complexities together with expert legal counsel and get the help you need to decide on the delicate estate planning choices you will need to make to ensure that your loved ones are well cared for in the event of your passing.
Crucial to those choices, a special-needs trust is best created by professionals well-versed in estate planning and capable of handling the carefully custom tailored needs of you and your family.
Whether you need to adjust an existing trust or are looking to create a new one, please contact us for your complimentary personal consultation and we’ll get you on the road to peace of mind.
