Do You Love Someone With Special Needs?

Government-sponsored benefits come with stringent guidelines and income requirements that a person must meet to receive these often life-saving benefits. Anyone who has gone through or watched a loved one go through the disability process knows firsthand how taxing it can be and how strict the requirements are.

When you began building your wealth, you likely did it with the intent to care for your family, even after you pass away. But that wealth can be more than enough to rock the boat and see Uncle Sam revoke the benefits your loved one depends on to survive.

Don’t worry; there are ways you can take care of your loved ones with disabilities without jeopardizing the benefits they rely on to survive!

What is a Special Needs Trust?

To understand a special needs trust, it is important to understand an irrevocable trust.

A trust is a legal entity you can create and then place assets into. As the creator of the trust, you are called the “trustor.” When you create your trust, you must name a “trustee,” the person or agency tasked with managing the trust and its assets. Anyone who gains assets from the trust is called a “beneficiary.”

Trusts can either be revocable or irrevocable. A revocable trust allows you, the trustor, to change the terms of or even cancel the trust without much hassle.

An irrevocable trust is different in the sense that it can not easily be changed or revoked once it is created and assets are placed in it. This is often because an irrevocable trust comes with additional benefits that a revocable trust doesn’t. Some irrevocable trusts have additional asset protections, while others may offer certain tax benefits.

A special needs trust is a type of irrevocable trust with the additional benefit of caring for someone with a disability without threatening the benefits they receive from government programs.

If you are the parent or guardian of a person with special needs, you may be interested in creating a special needs trust to help care for them. While a special needs trust may be created for the benefit of another, and should be prepared while you are still alive, it is an invaluable estate planning tool that allows you to care for your disabled dependent even after you are gone.

How Can You Create a Special Needs Trust That Works Before and After You Die?

A person who has more than $2,000 of countable assets is not eligible for SSI benefits. This means that simply paying for the groceries and necessities of your loved ones could be enough to make them ineligible for SSI support.

Creating a special needs trust allows you to allocate funds and other assets to care for your loved one without threatening their government benefits. You can and should create a special needs trust while you are alive and use it to care for them as that is far less complex and expensive than the process needed to create a special needs trust from your assets after you have passed away and the loved one is about to inherit the funds.

What Are the Disadvantages of a Special Needs Trust?

Special needs trusts are invaluable to helping a dependent care for themselves without losing their benefits. Still, there are some things you should be aware of when contemplating a special needs trust.

They Can Be Expensive

Special needs trusts are complicated legal entities that require maintenance and constant funding. Creating a trust is an expensive process. Then, you are tasked with maintaining and funding it, both of which can be fiscally draining. You should be aware of the costs associated with this type of trust before creating one.

The Assets Belong to the Trust, Not You or the Beneficiary

When you fund a trust, you are essentially transferring assets out of your name and into the trust’s name. This means that these funds are not readily available to you or the beneficiary. If funds are needed from the trust, the beneficiary will have to request them from the trustee, and the trustee will have to decide if the request is warranted.

To Preserve Access To Government Benefits, The Assets Can Only Be Spent on Qualifying Expenses

A Special Needs Trust supplements government benefits for your beneficiary and cannot be used for just any want or need. For example, the Special Needs Trust should never give the beneficiary cash, or pay for or provide certainother items that would trigger a potential loss of government benefits.

Do You Need a Lawyer?

Trusts already have a complex legal and fiscal nature. Special needs trusts are even more complicated because they are designed around government benefits and caring for a disabled loved one. While there are services you can use online to create a trust, those services will not understand or care about your unique situation and can give you the wrong answers to your needs.

That is why working face-to-face with an estate planning attorney who is interested in helping people, not a fast payday, can benefit you and your loved ones.

Call 248-609-1718 to schedule your free consultation with Kendal Law Group PC and find out how we can put this invaluable tool to work and take care of your loved ones who need a little extra help!