If you have a loved one who is physically, mentally or developmentally disabled he or she may be entitled to receive government benefits, such as Supplemental Security Income (SSI) or Medicaid. Most of these benefits are needs and income-based and are thus, available only to those with very limited resources.
If you leave a disabled dependent a substantial inheritance, you may accidentally disqualify that individual from receiving benefits which might be essential to his or her care. However, we find that clients are often uncomfortable with the idea of completely disinheriting a loved one. A third-party special needs trust may help address this problem.
This type of trust is created for the specific purpose of supplementing the government benefits to which the beneficiary is entitled - -- providing only for items above and beyond the benefits the disabled beneficiary receives from governmental agencies or programs. It allows a client to leave assets to their loved one without disqualifying that loved one from the benefits that they have come to rely on.
One of the requirements of a third-party special needs trust is that the beneficiary not have any control or ownership of the trust assets. In order to accomplish this, the trustee must be given complete authority regarding the distribution of the trust assets and income. The beneficiary cannot have the power to demand payment of either income or principal from the trust. This makes the choice of trustee extremely important.
This brief article is no substitute for careful consideration of all of the advantages and disadvantages of a special needs trust, especially as applied to your unique situation. Before implementing any significant estate planning strategy or selecting a Trustee for a Special Needs Trust, you should consult with your estate planning advisor.
For more information on planning for those with special needs, please contact Davis & McCann, P.A. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, and related matters.
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