A special needs trust (SNT) is an estate planning tool used by people with disabilities to provide financial support to the person with the greatest need. Unlike ordinary trusts, these trusts must include explicit language that states they are intended to be supplemental care trusts. They must also contain language that explains the exception to the Omnibus Budget and Reconciliation Act and Social Security Operations Manual. The trust document also contains relevant provisions of the United States Code.
The Special Needs Trust can help protect public benefits for the disabled beneficiary. If the trust beneficiary receives government benefits, such as SSI, this money could endanger those benefits. If, however, the trust document contains a “payback provision,” Medicaid can place a lien on the assets of the trust upon the death of the disabled beneficiary. Third-party SNTs do not include this provision, while first-party SNTs do. However, payback is not automatic. The state must indicate its interest in a lien to receive payment.
In addition to benefiting the beneficiary, a special needs trust can help protect the beneficiary from being disqualified for certain government programs and services. Furthermore, it assures a third party that these funds will be used as intended. Moreover, because the assets are irrevocable, they cannot be seized by creditors or lawsuit winners. Therefore, a special needs trust is a great choice for anyone with a disability.
A special needs trust can be set up with the proceeds of a life insurance policy or a will. Once funded, these funds can then be transferred into the special needs trust. It is important to understand what a special needs trust is before leaving money to a special needs person. This estate planning tool will protect public benefits and prevent family members from having to spend time and money on their loved one. The importance of setting up a special needs trust cannot be overstated.
While a special needs trust is the perfect choice for an individual with a disability, it isn’t the right choice for every person with a disabled child. A specialized attorney can help you find the best option for your needs and goals. They can also assist you with the legal paperwork. The best choice is to work with an experienced attorney who understands the process. The benefits of a special needs trust are numerous.
In addition to the attorney, a family member can also be appointed as the Trustee. A family member or professional can act as co-Trustees but it is important to remember that conflicts of interest may arise between the co-trustees. A trust document should specify who can serve as a co-Trustee. Co-trustees should be chosen with the child’s best interests in mind.
Third-party special needs trusts are also available. The primary difference between a third-party and a first-party special needs trust is who funds them. A third-party trust, on the other hand, is funded by someone other than the beneficiary. If the third party is a parent or grandparent, they may be a more appropriate option for your child. The key is to keep the money out of your child’s hands.
The money you put into a special needs trust should cover expenses that government benefits will not cover. For example, money deposited into a special needs trust should be used for medical care, recreation, and dental and vision care. If you give money directly to the beneficiary of a special needs trust, it will be counted as income and the funds could result in benefits being reduced or even suspended. The amount of money needed for these expenses depends on the nature of the disability. It can range from tens of thousands of dollars to millions of dollars. The financial planner will help you decide which options are best for your child and his or her family.
Typically, SNTs are funded by the grantor, usually a parent or grandparent. In a third-party SNT, the assets in the trust originally belonged to someone other than the beneficiary of the trust. The settlor of a third-party SNT may want their child or grandchild to inherit their assets and avoid the probate process. Some individuals who need a special needs trust may open one themselves.
If you have any doubts about the validity of a special needs trust, it is best to consult with an attorney. They can help you develop a trust document that is both valid and broad enough to meet the needs of the beneficiary. Making these decisions is difficult, and a professional will ease your mind. So, consult an expert in special needs trust planning to create a special needs trust that will help your child’s financial future.