What are Special Needs Trusts?
You can consider a trust as “formed” whenever a piece of property (finances, real estate, or other tangible items) becomes managed by another person for someone else’s benefit. An individual handling the property itself is called a “trustee.” The person whose benefit this is for is called a “beneficiary”. A trust generally lasts as long as it is required. This also usually ensures a trust can be maintained until the beneficiary’s death or until the funds are exhausted.
A Special Needs Trust is one made specifically to benefit a person with physical and/or mental incapacities, including those with mental disabilities who often lack the ability to deal with their own assets.
A trust should be produced with specific demands, taking note of the lifestyle, and future of the beneficiary the trust is being created for. In many cases, these special needs trusts can be used to ensure that beneficiaries don’t lose critical government benefits they may be receiving. The trustees of a special needs trust are often comprised of family members or, if a suitable and dependable family member is unattainable, a third party can be appointed by the court. Choosing an appropriate trustee should be done very carefully, especially for special needs trusts that are often utilized for the benefit of a young person.
What are the primary benefits of creating a special needs trust?
In many cases, folks with disabilities will qualify for government assistance like Supplemental Security Income (SSI), Medicaid, vocational rehabilitation, or subsidized housing. Far too many people make the mistake of leaving their assets to a disabled loved one through a standard will. This is important to note because acquiring assets, such as a lump sum of money, can disqualify your loved one for these types of government assistance programs. Even if you mean well, you could actually be doing your family member a disservice by giving them such an inheritance via a will.
By creating a special needs trust, instead of merely using a will, you can avoid these issues. Because a trustee has total control over the administration of the funds, and a beneficiary does not, government program administrators, like the ones from SSI and Medicaid, ignore the trust assets when considering eligibility. This is extremely beneficial.
Special needs trusts are also utilized for setting up inheritance funds or proceeds from a settlement on behalf of the disabled person. In the event your loved one is the plaintiff in a successful lawsuit or inherits assets, those funds will then be diverted into your trust and won’t disqualify him or her from receiving their much-needed government benefits. On another note, if a beneficiary is ever sued in court, the funds sitting within his or her special needs trust cannot be touched –they will not be subject to any judgment by any court system.