Special Needs Trusts
If you have a family member of loved one who has special needs, you know how difficult their life can be. Though you might want to leave this person money or assets upon your death, this gift from you could actually hurt them if you are not careful.
Many differently-abled people qualify for assistance through government programs like SSI Disability, Medicaid, housing subsidies and food stamps. Sometimes benefits through these programs are worth more than $100,000 to the disabled person.
To qualify for many of these programs, a person cannot have a lot of money or assets. In fact, if you give a disabled person money, that gift can make them lose those valuable and helpful benefits. The gift you give would have to be used to pay for the goods and services that were covered by government benefits. When the gift runs out, the disabled person would need to re-apply for the benefits, and they are no better off than if they had never received the gift.
There is a solution to this problem: Special Needs Trusts. You can give money and assets to a Special Needs Trust for the benefit of your disabled loved one. Assets in a Special Needs Trust may be used in certain ways to enhance the lives of the disabled person, but will not affect the government benefits the person receives.
Special Needs have special rules so they do not cause a disabled person to lose government benefits. The trusts are irrevocable, and cannot be completely controlled by the beneficiary. They cannot be used to replace the food, shelter and medical benefits provided by a government program, and they cannot be given directly to the beneficiary.
The trust assets may be used for many life-enhancing services and activities. Some examples are: paying for beauty parlor or spa treatments, paying for travel and attractions like Disneyland, paying for personal services like someone to read books to the beneficiary, and paying for entertainment equipment.
Managing and spending from a Special Needs Trust must be done carefully to be sure the person’s benefits are not in jeopardy.
If a Special Needs Trust is funded by someone other than the beneficiary, it is called a Third-Party Special Needs Trust. If it is funded with assets that already belonged to the beneficiary, it is a First-Party S.N.T.
There are special rules for a First-Party SNT. Any assets that are left in the trust when a beneficiary dies must be given to the government in repayment for any government benefits received.
Planning with both first- and third-party Special Needs Trusts have a very positive effect on the quality of life for thousands of differently-abled people.
If you have a special needs child or relative and you want to provide for them during your life or upon your death, please call Krause Donovan Estate Law Partners, LLC today about setting up a Special Needs Trust.