In this post we will look at the costs that you may incur if you choose to create a special needs trust. Before we get into the expenses, we should explain the value of these trusts from an overview.
Preserving Benefit Eligibility
You would use a special needs trust to effectively provide resources for the benefit of a loved one who has a disability.
Many people who have disabilities are unable to earn income, so they have very limited financial resources. If you can demonstrate significant financial need, you can qualify for need-based government benefits.
Clearly, people with disabilities are going to require medical care and treatment. Depending on the disability in question, the medical bills can be exorbitant.
Medicaid is a need-based government run health insurance program. It is jointly administered by the federal government along with each state government. Many people with disabilities qualify for Medicaid coverage, and it can be an important lifeline.
In addition to Medicaid, Supplemental Security Income is also important to many people with special needs. This program provides ongoing income for those who cannot earn income on their own.
If you were to name a benefit recipient in your last will, the inheritor would be lifted into a different financial status after you pass away. This improved financial status could result in a loss of benefit eligibility.
You can avoid these potential negative consequences if you create a special needs trust. When you create the trust you name a trustee to act as trust administrator. This can potentially be a person that is known to you, but many people will use the trust department of a bank or a trust company.
Special needs trusts are alternately called supplemental needs trusts. This is because the trustee that you name in the trust agreement can use assets that have been conveyed into the trust to provide for the supplemental needs of the beneficiary.
These would be approved needs that are not covered by government benefits. The eligibility of the beneficiary is not jeopardized when the assets that have been conveyed into the trust are used for approved purposes.
When you create a special needs trust, you can improve the beneficiary’s quality of life, but you do not jeopardize benefit eligibility.
Cost of Trust Creation
Now that you know why special needs trusts are utilized, we can look at the cost factor. There going to be some expenses when you create any legally binding device. However, consider the financial impact of a loss of benefits.
If you are in a position to provide a significant bequest to a loved one with special needs, it is very likely that you can comfortably absorb the relatively nominal costs associated with trust creation.
Special Needs Planning Consultation
Our firm offers free consultations to people in and around Smithtown, New York. If you would like to discuss special needs trusts with a licensed estate planning attorney, send us a message to request an appointment.
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