The world of estate planning contains many different types of documents that you can use to hand off your assets and property to your loved ones after you pass away. Additionally, there are many different types of trusts that may prove useful depending on your situation. One type of trust available is what’s called a special needs trust, which is used to financially help those with mental, physical, or emotional difficulties. We’ll go over the key points of this estate-planning tool in this blog.
How Does a Special Needs Trust Work?
Let’s first go over a “trust.” This is a legal entity, similar to a business, in which property and assets can be placed (funded) for the benefit of someone else who is not the current owner. Once the trust is funded, those items are technically owned by the trust and subject to its terms. Depending on the type of trust used, those who previously had ownership can either retain control over its contents or relinquish control.
So, it is with a special needs trust that the beneficiary, who has a disability, receives assets by another party. A common example is a parent who wants to give his or her child with special needs an inheritance. Because those with special needs often need full-time caretakers or specialized care, their loved ones want to make sure that these costly expenses can be paid for.
Through Medicaid, Supplementary Social Income (SSI), and other government programs, individuals with special needs can receive financial assistance to meet their day-to-day needs. However, many of these programs are needs-based, meaning that those with a certain amount of assets do not qualify. For example, someone cannot have more than $2,000 in assets to qualify for SSI.
To get around this (in a perfectly legal and acceptable way), loved ones of those with disabilities may elect to set up a special needs trust so they are financially secure and do not lose important government benefits. If assets are in a trust, they do not count toward the $2,000 limit for SSI. Another useful feature of a special needs trust is that terms can be placed on its contents, meaning the funds can only be used for specific purposes.
Estate planning is essential for anyone who is looking to provide their loved ones with a sense of financial security after they pass away. Individuals with special needs, for several reasons, are especially dependent on outside financial help, and trusts made for this situation can be a huge help for them and their families. Our firm would be honored to help you set up a special needs trust for a loved one or assist you with any other estate-planning documents. Call us at 334-203-6667 to discuss your options with us today.