Questions About Special Needs Trust part II

A Trust is a written set of instructions for managing your assets – bank accounts, financial investments, real estate and so on. In this newsletter we will be discussing Special Needs Trusts.   A Special Needs Trust is designed to work for the benefit of a person with a disability, usually a son or daughter, brother or sister, or parent. It provides a set of instructions for managing assets set aside to help the disabled person without jeopardizing government benefits he or she might be receiving.  These trusts are relatively inexpensive to create, and are usually once-in-a-lifetime investments.

When should I create one?

A Special Needs Trust is a valuable estate planning and investment tool.

It is very common to create a Special Needs Trust early in a child’s life as a long-term means for holding assets to benefit the disabled child. This is particularly true of parents who wish to leave funds for a child’s benefit after the parents’ death. The Special Needs Trust is the estate-planning tool of choice for those parents.

Additionally, the disabled or chronically ill individual may at some time during his or her lifetime come into funds from third party sources, such as a personal injury settlement or a bequest from relatives or friends, Social Security back payments, insurance proceeds, or the like. 

If my family is wealthy and not concerned with government benefits, why bother with a supplemental needs trust?

A Special Needs Trust can help protect your disabled family member, and make your wishes known.

Some Trusts aren’t appropriate for Special Needs persons because they don’t address the specific needs of the disabled beneficiary or his future lifestyle. Even in situations where a family may have significant resources to help a disabled family member a Special Needs Trust should be established to address these issues.

Monies placed in the Trust remain non-countable assets and allow the beneficiary to qualify for available benefits and programs. Why sacrifice services that might be available to your relative now and in the future?

If having money in the name of my disabled child causes problems, why can’t I leave the money to a sibling so they can take care of him/her?

Leaving money to others can create serious problems.  A non-disabled sibling holding assets for the benefit of a disabled sibling could have financial issues of their own, and be subject to such liabilities such as judgments from automobile accidents, a bankruptcy, an IRS garnishment or a divorce.

In such circumstances, the assets meant to benefit the disabled or chronically ill person could go to pay the judgment creditors or the estranged spouse of the non-disabled sibling.  Using a Special Needs Trust guarantees that the funds will be held only for the benefit of the person under the disability or chronic illness, and not for any other purpose whatsoever.