Planning for the Heir with Special Needs:The Special Needs Trust

If you have a loved one with Special Needs (an emotional or physical challenge), you need to be concerned about the balance between what they might stand to inherit and its affect on or possible loss of their government benefits. This is frequently overlooked in the Estate Planning process.

Families need to be aware of their options in providing for their Special Needs loved one.

  • The Special Needs Person (SNP) may be disinherited. This is an option if the assets available for the SNP are small.
  • Give the SNP the assets outright. Caution should be exhibited with this option as it could result in government interference or the SNP spending it unwisely.
  • Another option is to give the funds to a third party for the care and well-being of the SNP.  Only be careful! The third party you choose has no legal obligation to spend it on the SNP. It is subject to the owner’s creditors and can have a negative effect on his or her income or Estate Plan. Also, when the owner dies, his or her heirs may not be trusted to care for the SNP heir.
  • This leaves us with the last and usually best option, the Special Needs Trust (SNT). Special Needs Trusts are used to allow one person to set aside funds for the care and benefit of an SNP. This is a common family practice for special-needs children, grandchildren, siblings, or other relatives. The key to an SNT is that they are drafted to be totally discretionary so that the SNP cannot demand distributions. Since the assets are not legally available to the beneficiary on demand, they are not considered assets when the SNP applies for government benefits.

Special Needs Trusts are also used to manage and shelter funds of the SNP gained through inheritance, life insurance, or personal injury award. As long as the SNP is not the trustee, there is no interference with the SNP’s ability to qualify for SSI or other government benefits.

SNT’s must conform to government requirements to assure that the SNP continues to be eligible for SSI or Medicaid.

Retaining a Board Certified Elder Law Attorney enables you to learn how a Special Needs Trust may protect your Special Needs Person, and demonstrate to you other methods of Preserving Assets to be able to take advantage of Medicaid and other government benefits.

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