Ways to Use Special Needs Trusts in Your Estate Plan

If you have a loved one with special needs, you may be used to working with private physicians and schools or educational and medical institutions to ensure that they receive the care they need. When it comes to special needs estate planning, it can be important to consider creating a special needs trust that can be used to provide financially for a loved one with special needs in order to help ensure that they continue receiving this care. Did you know that there are several types of special needs trusts? Be aware of the differences in order to decide which type best suits your family’s needs.

A first party trust can be used when the beneficiary of the special needs trust is the person whose assets or property are going to fund the trust, and that person is still under the age of 65. If you are a disabled individual, a first party trust may help allow you to qualify for medical assistance from the state. You can make contributions to the trust after creating it until you turn 65, but you cannot make any contributions thereafter. If you withdraw income or principal from the trust, it must be used for your sole benefit.

Another type of special needs trust is called a third-party trust and can be used when you have decided to fund a trust for another special-needs beneficiary, like your child or another relative. This type of trust is also called a supplemental needs trust. Its existence must be reported if the trust beneficiary applies for medical assistance, and the appropriate authority will decide whether assets in the trust should count when determining the beneficiary’s eligibility for government benefits. If you are considering leaving money to a loved one with special needs, creating a supplemental needs trust allows them to use the money you intend to leave them without jeopardizing any medical assistance they currently receive.

If you decide that a special needs trust may be appropriate for you or your loved one, sitting down with an attorney to make the decision of who to choose as trustee can be critical. The trustee will manage all of the funds on behalf of you or your relative.  Since the funds in the trust may be used for either daily expenses or specific medical or therapeutic needs, it is important to choose someone who understands those needs and can make the best choices possible. This person also needs to have adequate time to devote to overseeing the trust, checking in on the beneficiary, and handling his or her evolving needs.

For help navigating special needs trusts and related legal issues, please reach out to our office to schedule an appointment.