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Three Things to Know About a Special Needs Trust

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Date : October 26,2013
By : Enrica Clavito

If you wish to take care of a loved one who has special mental or physical needs upon the event of your death, one recommended solution is the establishment of a special needs trust that is set up in their name. It is one of the most loving acts you can do for people you care about, because it makes sure they continue to be cared for long after you yourself can no longer provide that care.

Who Needs a Special Needs trust

People with certain mental or physical disabilities who are unable to adequate provide or care for themselves often receives government benefits such as Medicaid or Social Security Insurance (SSI). Most programs of this type are means-tested, which means that in order to qualify, the recipient must have limited resources or income. Without a proper special needs trust in place, a disabled person could possibly receive an inheritance but subsequently lose their much-needed government benefits.

How it Works

A special needs trust can be a testamentary trust, meaning it is set up through a Last Will and Testament, or an intervivos trust, meaning it was set up during the benefactor’s lifetime. It will include provisions that prevent the income and assets allocated into the trust from counting as resources which are accessible by the beneficiary. This means the beneficiary would not be disqualified from receiving the needed government benefits.

A trustee would be appointed under the provisions of the trust, with the discretionary authority to make dispensations as benefits to the disabled beneficiary which not normally available under governmental strictures.

What Resources Are Exempt?

There are a number of assets that may not count as resources, and may therefore be exempt as disqualifiers. Some examples might be clothing, jewelry, household furnishings, a burial plot and policy, one vehicle, and in many cases, even the home. There are limitations on how much some of these assets may be worth.

For the long-term well-being of the beneficiary, it is critically important that the special needs trust be drafted by an attorney who is experienced in special needs cases. A trust can be invalidated for something as simple as improper legal language. A trust that has been poorly written can result in loss of benefits or savings, resultant financial or legal hardships, or even criminal prosecution or civil lawsuits and penalties. The attorney you choose will be able to draft and submit the trust in compliance with both federal law and the laws of your state.

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