A family with a member that has special needs, whether physical or mental, has many challenges and worries. For many parents, worrying about what happens to their child with special needs after the parents pass away is one of them. Often times, parents disinherit their child with special needs, leaving additional money to other children or relatives with the expectation that those third parties will care for person with special needs. This leaves too much unsettled and too much at risk, however, and can create unnecessary issues.
Supplemental Care Special Needs Trusts can help parents and guardians feel secure in the knowledge that their child with special needs will still be qualified to receive government benefits while receiving supplemental support to ensure quality of life.
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Here are five things to know about Special Needs Trusts:
- Supplemental Care Special Needs Trusts are created to hold property and distribute funds so that a disabled beneficiary remains eligible for government benefits like Social Security, Medicare, or Medicaid. They are different from General Care or Support Special Needs Trusts, which are designed to be the sole source of income for a person with special needs and will disqualify that person from receiving government benefits.
- It is very important that the trust be set up correctly. Incorrectly, parents and guardians face the risk of accidentally disqualifying their child for public benefits, so working with a qualified team is essential.
- Once the trust is established, it will need to be funded. Funding for the trust can be granted in a will, as part of a larger estate plan, by life insurance or distributions from other accounts upon death, by third parties, or by the creator of the trust during their lifetime.
- The role of trustee should be considered very carefully, as this person or persons will be responsible for managing the trust, making investments with trust assets, keeping records, and making distributions. In order to maintain eligibility for government benefits, the beneficiary of the trust cannot have any control over the trust; they cannot demand distributions, change the terms, or manage the assets.
- Telling family and friends about the trust is important. They might make provisions in their own estate planning for the person with special needs, leaving money directly to that person. Doing so could disqualify the person with special needs from receiving public funds. If family and friends know about the trust and the reasons behind, they will know to direct their gifts to the trust.
For more information on trusts of all kinds, contact us.