From Our “Ask a Question” mailbag, Who Receives the Remainder of a Special Needs Trust:
“At my son’s death, can I decide who receives any remaining money in the Special Needs Trust? I want to set up a Special Needs Trust for my son in my Will. But, when he dies, can my daughter receive what money remains?”
First, let me commend you on setting up the Special Needs Trust for your son in your Will. Planning will give you peace of mind, and critical protection for your child. If correctly drafted, your Special Needs Trust will provide for your son’s care while allowing him to qualify for needs-based government benefits. Benefits such as Medicaid can be vital to his well-being.
A Third Party Special Needs Trust Allows You to Pick Who Receives the Remainder at the Beneficiary’s Death.
A Special Needs Trust that you create using your money is called a Third Party Special Needs Trust. “Third Party” indicates that the Special Needs Person has not created the Trust using his money. When a Special Needs Person creates a Special Needs Trust using his money, it is called a “First Party” Special Needs Trust. For more information about the various types of Special Needs Trusts, read more.
You have no legal obligation to leave your son any inheritance. This fact allows you great flexibility in creating your Special Needs Trust. If you don’t have to leave him any funds, then any limitations you choose to place on those funds is outside of his control, and the funds are not counted as his. Certain terms must exist for your trust to qualify as a Third Party Special Needs Trust. These conditions allow your son to benefit from the trust while qualifying for his needs-based government benefits. But after satisfying those terms, you are free to decide many aspects of the trust including dictating who receives any money in the trust at your son’s death.
Have the Remaining Funds Pass Into a Protective Trust for Your Daughter. Protect the Assets From her Divorce and Creditors.
You have great flexibility in deciding who and how the remaining funds pass at your son’s death. For example, you could say that whatever remains passes outright to your daughter. But, if you do, then those funds will be available to your daughter’s creditors or become embroiled in a failed marriage. Instead, you could have the Special Needs Trust pour into a different, more flexible trust at your son’s death. Think of this as a protective wall around the inheritance sheltering her. You may grant her broad use of trust funds, but deny her future spouse from accessing the assets in a divorce.
A Third Party Special Needs Trust can be a flexible document, providing protection not only to your Special Needs Child but also to the rest of your family. Take the time to investigate all the options available to you.
For More Special Needs Trust Information:
For more information see my Article Special Needs Trusts: Everything You Need to Know.
Who Receives the Remainder of a Special Needs Trust?
My goal in this Post was to answer the question “Who Receives the Remainder of a Special Needs Trust.” The answer is anyone can be the recipient; you make that determination when drafting the trust. Please feel free to send me comments or questions.
Contact our office for a free consultation if you have further questions about Special Needs Trusts or any other estate planning issues.
Wills, Trusts, Probate, and Estate Litigation it’s all we do!