A special needs trust, also known as a supplemental needs trust, is an estate planning tool used to allow assets to be held in trust for the benefit of a physically or mentally challenged individual, or a person with a chronic or acquired illness. This type of trust allows you to provide a resource to pay for any needs over and above the basic benefits that may be provided by the government. There are four reasons to consider working with a trust attorney to establish a special needs trust for your loved one with a disability or illness.
1. Minor Children
Special needs trusts allow you to establish a source of funds for your child that can supplement, without replacing, their government benefits. As a result, the government benefit programs would pay for your child’s basic, essential needs while a special needs trust can pay for the “extras” that are not covered by government programs. This type of planning helps to ensure that your child’s quality of life will be the best possible in case you were no longer there to provide for them.
2. Unable to Handle Money
If you have a loved one with special needs who is unable to manage their finances without assistance, a special needs trust allows the grantor, the person setting up the trust, to appoint a trustee to distribute and even manage the money as needed.
3. Government Benefits
A special needs trust allows a person to receive money without interrupting any need-based government benefits. Otherwise, a gift or inheritance as little as $2,000 may cause a suspension or loss of benefits.
4. Providing Income
A special needs trust allows you to provide an income for ‘extras’ that are not be provided with government benefits. While programs such as Supplemental Security Income (SSI) may provide enough for basic food, shelter and health care that the beneficiary may be entitled to receive, the trust may be used to pay for hobbies, extracurricular activities or even a vacation to improve their quality of life.
If you have a loved one with a disability or chronic illness, work with an estate planning attorney to ensure that your estate plan includes a provision for their special needs.