A primer on special needs trusts

Special needs trusts can be very effective estate planning tools.

If you have a son, daughter, sibling or other relative with special needs (including physical disabilities, developmental delays or mental health conditions), there is a good chance that you are interested in leaving money for him or her as part of your estate plan. You may assume that, by providing funds in a will to go to that person, you are helping with the costs of care and basic necessities. Your motives are pure, and you may be acting with the best intentions, but if you leave a lump sum of money to the one you love, you could actually end up hurting him or her by jeopardizing eligibility for government benefits like Medicare, Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI).

However, it doesn’t mean that you have to leave your special needs loved ones out of your estate in order to prevent the possible loss of necessary government benefits that could cover the costs of medical treatment, housing, care providers and other expenses. There is a solution to this conundrum: the special needs trust.

What is a special needs trust?

As the name implies, this type of trust is established for someone with special needs like a disability. Special needs trusts allow assets to be provided for the benefit of the beneficiary without him or her actually owning them, thus they won’t be considered as personal assets for purposes of government benefit eligibility exclusions. Most government benefit programs prohibit recipients from having more than $2,000 in personal assets, so if you were to leave a loved one a lump sum of more than that, he or she could be declared ineligible for government assistance.

Essentially, the funds don’t belong to the beneficiary, but are instead controlled by a trustee. Since the beneficiary doesn’t directly control the funds, they aren’t considered personal assets and won’t exclude him or her from vital Medicare, SSDI or SSI funds. The money still provides much-needed income to cover food, housing costs, personal care attendants, medications not covered by Medicare and other expenses (including recreational activities, vacations, furnishings, clothing and personal items like electronics).

How do you know if a special needs trust is the best option?

Only you can ultimately decide if a special needs trust is in your loved one’s best interests. If the person who would benefit from the trust currently needs government benefits – or you anticipate they will need those benefits in the future – a special needs trust could be the right move to protect that eligibility. Of course, this kind of important decision cannot be made in a vacuum, and shouldn’t be made without consulting an experienced estate planning attorney familiar with the complexities of inheritance issues and government benefits. For more information about these trusts, and help creating one for someone you love, contact Stockton and Stern, Attorneys at Law. Call them today at 913-856-2828 or send an email.