Klenk Law

Who can I name as the beneficiary of the remainder amount in my son’s Special Needs Trust at his death?

Posted on Thu Oct 22, 2015, on Estate Planning

From our “Ask a Question” mailbag: I am planning to set up a Special Needs Trust for my son and place a gift in the trust each year to help provide care for my son after my death. If he dies without the entire amount being used, whom can I name as the beneficiary?

If I have the facts correct, you are thinking about forming an Irrevocable Trust for your son during your lifetime (“inter vivos”) and then placing money into the trust every year to create a pool of funds to provide care for your son after your death. I also assume, in order to provide the maximum tax benefits, you will use Crummey Powers to make these transfers free of Federal Estate Tax, and you will not serve as trustee.

If your plan is to keep these assets out of your taxable estate and to have them be sheltered from your future creditors, at your son’s death you should not name yourself, your estate or the creditors of your estate as beneficiary of the remainder. Instead, you are free to name anyone else or a charity. To maximize the tax benefits, you could have the remainder pour into a new trust for the successor beneficiaries. This would shelter the remainder from the successor beneficiary’s creditors, spouses and lawsuits.

If you have any other questions about spendthrift trusts, feel free to contact our office for a free consultation.

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Pennsylvania, Philadelphia

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