ESTATE & GIVING
Trust assets can be used for a variety of helpful and enriching benefits, all while not jeopardizing valuable government assistance.
Caring for a family member or friend with a disability or special needs can be difficult to navigate without expert help and the right plan. Whether due to an accident or mental disability, a special needs trust can help enrich your loved one’s life while not jeopardizing benefits that can be a significant source of income and health insurance.
What is a special needs trust?
A special needs trust, sometimes called a supplemental needs trust, is a legal arrangement and fiduciary relationship, which means one person or entity – the trustee – is charged with protecting the interest and assets for the benefit of another – the beneficiary. The trust essentially allows an individual with a disability or special needs to benefit from the income and principal of the trust without reducing their eligibility for government assistance such as Supplemental Security Income (SSI) or Medicaid.
The use of a special needs trust can protect against the reach of creditors, and it provides protection for a beneficiary who may be vulnerable, susceptible to undue influence or unable to manage money if the assets were given outright. But most importantly, a special needs trust stretches each dollar contributed to the trust and allows the beneficiary to be cared for at a higher level of care than is available from government-sponsored benefit programs, and it ensures the wealth transfer to a disabled individual can occur without jeopardizing the beneficiary’s benefits.
How can the assets be used?
Trust assets can be used to buy a wide variety of goods and services to assist the beneficiary and enrich his or her life. Common uses include personal care attendants, vacations, home furnishings, out-of-pocket medical and dental expenses, education, recreation, vehicles and physical rehabilitation.
Choosing the right trustee
Given the complexity and longevity of administering a special needs trust, it’s important to consider the best-qualified person or a corporate trust company to serve as trustee. Properly managing a special needs trust means understanding the disabilities of the loved one and being able to effectively communicate with a parent, caregiver or guardian, which can require a significant time commitment on the part of the trustee.
They must be able to prudently manage the assets held for the loved one’s benefit and understand the governmental regulations and how to work about them. The trustee, whether an individual or corporate institution, should be knowledgeable about what can be paid from the trust and what shouldn’t, as well as be able to prepare and retain records of earnings and disbursements for tax purposes. A corporate trustee is often better positioned than an individual trustee to effectively administer a special needs trust in a way that is compliant with state and federal laws.
You may find it helpful to consult a special needs attorney and your financial advisor to help you and your family provide the best care for your loved one with a disability or special needs.