Having an estate plan is very important, especially if you have a loved one with special needs. In such a case, you need to carefully consider how you will leave them your estate without making them ineligible for Social Security benefits, or any other public assistance programs.
If your loved one has countable assets over a certain value, they may not be eligible. But, what if the estate you intend to leave them is worth more than that? This is where a special needs trust comes in.
How do special needs trusts work?
Unlike an ordinary trust where the trustee can make payments directly to your loved one as per your instructions, a special needs trust operates differently. If your loved one receives the money directly from the trust, it could make them ineligible for, say, SSI. Instead, payments from the trust should only cover your loved one’s financial needs that are not covered by the public assistance programs like transportation costs, cost of caretakers, or other permitted expenses.
The benefits of a special needs trust
Besides preserving your loved one’s eligibility for certain support programs, setting up a special needs trust ensures that they benefit from your estate as you would have wished. With a trust, you are sure that your estate proceeds will be used for their intended purpose.
In addition, special needs trusts are irrevocable, and creditors cannot come after assets held in the trust should your loved one default on debt. This will ensure they are financially secure in such situations.
Other important considerations
If you are thinking of setting up a special needs trust for your loved one, it is vital to ensure that all the paperwork is spot on. Doing so will avoid legal bottlenecks as to the validity of the trust. It’s also advisable to have all the information you need beforehand to ensure that it’s the best way to pass on your estate to your loved one.