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In general, a trust is created when property or assets are managed by a person or firm for another person’s benefit. The person or entity who manages the trust is known as the “trustee” and is entrusted with the responsibility of making decisions in the best interest of the person who benefits from the trust, known as the beneficiary. Trusts are advantageous because they provide the ability to place conditions on how and when your assets will be distributed when you die, reduce estate and gift taxes, and allow you to skip the lengthy and expensive probate process. However, they can have other important benefits. 

Generally speaking, without proper planning, a person with special needs could be rendered ineligible for government benefits upon the  death of the beneficiary’s parent. The absence of the caregiver parent gone and / or the loss of the benefits could be devastating to the special needs person. A Special Needs Trust can avoid this situation. 

A Special Needs Trust is a class of trust made specifically for the benefit of someone with a physical and/or mental disability. It differs from the typical trust due to the special conditions that often need to be in place to accommodate the specific needs and lifestyle of the Special Needs Trust’s beneficiary. One of the important features of a special needs trust is that the assets in the trust will not be counted toward asset thresholds contained in government programs such as Supplemental Security Income (SSI) and Medicaid. The trustee has complete control over the assets in the trust, instead of the beneficiary. For this reason, government programs such as SSI and Medicaid ignore assets in a trust when determining eligibility. Many people are unaware of this and make the mistake of distributing their assets to a loved one with special needs through a will. This could cause them to exceed the asset limits for SSI and/or Medicaid, thus losing their benefits from these programs.

Special needs trust may also be set up to take the proceeds from a legal settlement on behalf of the person with special needs. For example, if someone is rendered disabled due to the fault of a drunk driver and thus receives a  award or settlement (even a small one), then this could knock the victim off of any government benefits being received.  A Special Needs Trust can ensure the victim’s compensation does not have such tragic effects. Also, the funds in the special needs trust can sometimes be protected from being paid out to a creditor or someone who decides to sue.

When setting up any trust, much less a Special Needs Trust, choosing the right trustee is of paramount importance. The trustee must be someone you are certain will act in the beneficiary’s best interest before and after your death. Often, this takes place in the form of a trusted family member who knows the beneficiary and his or her needs. However, if your situation doesn’t allow for this, a court can appoint a third party to manage the trust according to your written wishes.

Even if you believe your loved one with special needs will never need government benefits, it is still prudent to consider a Special Needs Trust. These trusts can provide for the unique and specific needs of the beneficiary in ways that other types of trusts cannot. Further, you never know what may happen in the future, especially when you’re no longer around. It may turn out that your loved one needs these government benefits one day. If that happens, they’ll be glad you provided them this option.

Special needs trusts are an excellent vehicle to ensure your loved one with special needs is taken care of in the event of your passing. It is also a good tool to take care of your children in the future in case a tragedy occurs down the road. However, they can be difficult to set up and it is advised that you consult an elder law attorney who will be able to examine your specific situation and make sure your loved one is taken care of for years to come. Give me a call if  you would like to speak with a trust lawyer regarding your situation. 

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Ruston Elder Law Attorney, Add Goff.