If you have a child, parent, sibling, family member or someone who means a lot to you who suffers from a chronic or severe disability, you are probably concerned about what will happen to them after you pass away. When creating your estate plan, you may wonder how and what options you have if you want to leave assets to that person.
Special needs trusts (SNTs) exist for people who want to leave assets for someone with a chronic or severe disability without that individual losing their eligibility for government benefits.
This legal arrangement aims to provide for the financial needs of the person with disabilities, enhance their quality of life, and provide additional support beyond the public benefits they receive.
In Illinois, there are three different types of special needs trusts:
First party special needs trust
This type of trust holds assets owned by the disabled person, typically funds received through inheritance, personal injury settlements or other forms of compensation.
Third-party special needs trust
Someone other than the disabled person creates this type of trust, usually a family member or a loved one, although they do not need to be related. It allows them to leave assets specifically designated for the benefit of the person with special needs.
Pooled special needs trust
Managed by a nonprofit organization, this type of special needs trust combines funds from multiple beneficiaries into one account. Each beneficiary has their own sub-account within the larger pool.
The specific rules and requirements regarding special needs trusts are outlined in state law and may vary depending on factors such as income eligibility criteria, age restrictions and more.
It is critical to consult with someone who understands estate planning and disability law to ensure compliance with all relevant regulations when establishing a special needs trust in Illinois.