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Should I Use a Special Needs Trust?

Estate Planning For Life's Stages

Signing papers in law office
A special needs trust is a popular strategy for those who want to help someone in need without risking that the person will lose their eligibility for programs that require their income or assets to remain below a certain limit.

Understanding a Special Needs Trust

A special needs trust is a legal arrangement and fiduciary relationship. It allows physically disabled, mentally disabled, or chronically ill individuals to receive income without jeopardizing their eligibility for public assistance disability benefits provided by Social Security, Supplemental Security Income (SSI), or Medicaid. The proceeds from this type of trust are typically used for medical expenses, caretaker expenses, or transportation costs.

The Key Players

  • In a special needs trust, a grantor creates the trust.
  • The grantor names a trustee who will control the trust by overseeing its management and the disbursement of funds.
  • The beneficiary is the person for whose benefit the trust is created. Understanding that the trust will supplement the beneficiary’s government benefits but won’t replace them is essential.

Benefits of a Special Needs Trust

A significant benefit of a special needs trusts is that they are irrevocable and can’t be tapped by creditors via a lawsuit. A special needs trust can also have benefits for all involved parties. The beneficiary gets financial support without jeopardizing their eligibility for income-restricted programs or services, and the person or party that contributes to the trust is assured that the proceeds will go to expenses they stipulate.

Other Key Factors

  • This trust helps cover a disabled individual’s financial needs that aren’t covered by public assistance payments. The assets held in the trust don’t count toward public assistance eligibility.
  • The trust is funded with assets belonging to a person other than the beneficiary, and funds belonging to the beneficiary can’t be used to support the trust. Funding may come from gifts, an inheritance, or proceeds of life insurance policies.
  • Assets originally belonging to the disabled individual placed into the trust may be subject to Medicaid’s repayment rules. However, assets provided by third parties, such as parents, aren’t.
  • The grantor, or their legal representative, must carefully define the terms of the trust documents. Using clear definitions helps to ensure the trust’s validity and confirm that the trust’s directives and purpose are explicitly clear.

Take Action Today

To explore creating a special needs trust, speak with an experienced attorney at Ozarks Legacy Law today. Book a call with one of our attorneys to start the process.