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What to know about special needs trusts

On Behalf of | Dec 29, 2022 | Estate Planning

If someone in your family has certain disabilities, they may qualify for Medicaid and other government benefits based on their financial situation. However, to ensure they continue receiving the care they need, you may want to give them an inheritance after you pass. If you don’t do this properly, the inheritance you leave may impact their eligibility for the benefits mentioned above.

This is where a special needs trust comes in. It allows you to provide financial support for a disabled loved one without disqualifying them from other benefits.

Assets to include in the special needs trust

A special needs trust can include assets the person owns currently or assets you want to give the beneficiary. This trust aims to ensure the beneficiary receives the assets a little at a time rather than all at once. This ensures that the additional income does not impact the person’s eligibility for government benefits.

Use of the funds by the trustee

You will assign a trustee to the special needs trust who oversees the assets placed in the trust. This individual can decide how the funds are used; however, they must comply with all laws. Remember, the goal of a special needs trust is to supplement the government benefits a beneficiary receives. This means that it is forbidden for the trustee to use the funds for things like housing or food, which are covered by government benefits.

Other considerations

All special needs trusts are irrevocable. This means that once the trust is funded, you cannot change it. Also, the beneficiary must meet the legal requirements of disability to qualify for this trust option.

You must also consider that you can only create this type of trust for someone under age 65. Knowing the legal process and how to meet the legal stipulations will help you establish and use the special needs trust.