When you are creating an estate plan, there are sometimes some special considerations that you must take into account. One of these special considerations occurs when you have a dependent who is mentally ill or disabled. Often, a special needs trust is used to ensure that the person with special needs is properly cared for after you pass away.
For many people who have special needs, the ability to qualify for certain government assistance programs is vital. Supplemental Security Income, subsidized housing, Medicaid, and other programs have asset and income limits. Coming into a substantial inheritance can affect eligibility for those programs. Special needs trusts are one way that you might be able to ensure that your beneficiary will still qualify for the help they need.
A special needs trust is set up so that the beneficiary doesn’t have control of the trust. Instead, the assets and funds in the trust are disbursed by a trustee. Since the recipient of the government assistance doesn’t have control over the trust, the assets in the trust aren’t considered for eligibility.
There is another bonus to setting up a special needs trust. If your beneficiary is ever sued, the assets in the trust can’t be touched, This provides another level of security for the disabled or mentally ill person since the income from the trust won’t be stopped if there is ever a civil judgment against him or her.
It is very important to understand how a special needs trust can affect your estate and how it will affect your loved one. Once you understand those points, you can make a decision about whether the trust is appropriate for your needs or not.
Source: FindLaw, “Special Needs Trusts FAQ’s,” accessed Sep. 02, 2015