What are the benefits of a special needs trust as opposed to a traditional trust?
A special needs trust is a unique type of trust intended to benefit adults or children with a mental or physical disability. For families with a disabled loved one, a special needs trust offers a means of setting funds aside for the benefit of your relative, while not compromising their eligibility for certain government benefits. Anyone with a disabled loved one should explore the concept of creating a special needs trust. Our Brandon estate planning lawyer discusses some basics about special needs trusts and how a special needs trust may benefit your family below.
Why a Special Needs Trust
Government programs like Supplemental Security Income and Medicaid offer much needed financial support for individuals with mental or physical disabilities. Having a disability will typically result in considerable medical expenses that are likely to be ongoing for the life of the individual. If you gift certain assets, like cash, to your disabled loved one, you could jeopardize their eligibility for government assistance. Without Medicaid and like programs, your loved one may seriously struggle to pay for their large medical and related expenses.
This is where the idea of a special needs trust enters. Special needs trusts offer a legal and safe means of leaving property directly to your loved one without causing them to lose eligibility for SSI or Medicaid. You have the power to place assets within the trust, to be controlled by a named trustee.
The trustee will be in charge of managing the assets and spending the funds for the sole benefit of your loved one. Funds do not go directly to your loved one; rather, they are spent for the disabled recipient’s benefit. For this reason, the assets within the trust will not count towards eligibility requirements for government programs. Funds within the trust are commonly used to cover the cost of a personal care attendant, education, recreation, vehicles, vacations, and more. The trust will end when the funds are spent or upon the death of your loved one.
You have some options when it comes to making a special needs trust. You can either create your trust, which will go towards the care of your individual disabled loved one or may consider a pooled trust. For families looking to set aside a modest sum, pooled trusts may be the right option. A pooled trust combines the funds of several trusts to improve their investment power. Funds are still held in a separate account for the benefit of each. Your estate planning lawyer will assist you in deciding what type of special needs trust provides the best benefits for you and your loved one.