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Why You Should Create a Special Needs Trust for a Disabled Loved One?

Weber Law Aug. 10, 2014

When people have family members with physical or mental disabilities, they frequently want to leave assets or money to provide for the care of their disabled loved one.  Although this is a laudable goal, the process of making an inter vivos or testamentary gift to a disabled person must be done carefully.

Without proper estate planning, a well-intentioned gift can cause financial harm to your loved one by undermining his or her eligibility for means tested benefits like Medicaid, Supplemental Security Income (SSI), Medicare or Social Security Disability Income (SSDI).  If you have an experienced Wichita estate planning lawyer set up a special needs trust, this can provide a way for you to make gifts to your disabled family member without jeopardizing his or her eligibility for government assistance.  Although certain assets can be provided to a disabled loved one without affecting eligibility for state or federal needs based benefits, many types of gifts can threaten critical financial assistance.

A special needs trust is set up for a beneficiary who is the recipient of public assistance or who it is anticipated to qualify for such assistance in the future.  A special needs trust cannot be revoked or modified by an immediate family member of the beneficiary.  The function of the special needs trust is to provide “supplemental” support to a disabled recipient without impairing eligibility for need based government assistance.

When creating a special needs trust, the trust document must clearly state the intent of the trust.  Many types of public benefits that are vital for someone with a disability restrict the recipient’s ability to exercise control over substantial assets.  The trust must properly express the intention to supplement public assistance benefits rather than to supplant such benefits.  When designing the trust, the beneficiary cannot be provided with the power to compel or direct trust distributions.

There are many families that establish a special needs trust for loved ones who cannot live independently without supplemental financial assistance.  When funding the trust, families might want to conduct an analysis to ensure that the amount transferred into the trust is sufficient to cover housing, vacations, furniture, computers, out-of-pocket expenses, caregivers, social activities, educational expenses, dental bills, vehicles and a range of other resources that can improve your family member’s qualify of life.  The trust should also set forth the types of activities and expenses the trust is designed to cover.  The trustee cannot provide the money directly to the beneficiary but can purchase a wide range of goods and services for a disabled family member, including but not limited to the categories of items indicated above.

While this type of trust is usually set up by parents for their children, there is no requirement that a person be a family member to contribute property to a special needs trust.  If you have questions about special needs trusts, we welcome the opportunity to talk to you about your needs and goals.  We invite you to call us or submit an inquiry form through this website to schedule your initial consultation.