Special Needs Trusts
A special needs trust ensures that a beneficiary with a disability will have their financial needs met and government benefits uninterrupted if a family member, particularly a parent or guardian, leaves them an inheritance. Planning for someone with a disability involves careful thought and preparation. Bestowing assets to a loved one with a disability requires having secure measures in place that will not end any Supplemental Security Income and Medicaid benefits.
If a parent were to leave their loved one who is on government disability benefits an inheritance, it could affect their eligibility to continue receiving those kinds of benefits. It is worth noting that certain property, such as a house and car, do not affect Supplemental Security Income and Medicaid eligibility. However, cash and assets in bank accounts will disqualify a recipient of government benefits. This is where a special needs trust comes in handy.
Instead of transferring property and other assets directly to someone who is on government benefits, a special needs trust is created to serve as an intermediary and placed under the care of a trustee. Since the special needs trust is established under another person’s name (the trustee), Supplemental Security Income and Medicaid do not count the trust as part of the beneficiary’s income and assets. Therefore, the beneficiary would still be eligible for their government benefits while also benefitting from an inheritance.
The trustee of the special needs trust will always be in control of the assets in the trust. They have a fiduciary duty to fulfill the trust according to its terms and conditions. Failure to do so can prompt serious legal consequences and ramifications. Since the beneficiary does not have control over the assets, the trustee oversees the distribution of the assets in the trust in a specified manner. For instance, the trustee is not allowed to give money directly to the beneficiary. Instead, the trustee can make purchases and pay for services on behalf of the beneficiary. They could, for example, pay for vacations, home furnishing, recreational activities, clothes, out-of-pocket medical expenses, out-of-pocket dental expenses, and education costs.
A special needs trust is designed for someone who has a disability or incapacity. The beneficiary is someone who is also benefitting from government benefits and support. Parents who wish to secure a stable financial future for their child without disrupting their government support usually opt for a special needs trust. Since the trust, not the beneficiary, controls and owns the assets, the child is not in danger of losing their Supplemental Security Income and Medicaid benefits. It does not matter whether a special needs trust holds $10,000 or $1 million. A beneficiary’s benefits will not be affected as long they do not own the trust. As a result, the low threshold that is set by the government programs will never be met.
If you are interested in more information about special needs trusts, it is essential to consult with a trusts attorney in Little Rock, AR who has years of experience with trust formation and administration.
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