Updated Fri. Sep. 8, 2017, What Is a Special Needs Trust?
From Our “Ask a Question” mailbag: “What is a Special Needs Trust?
See my website for more FAQ about Special Needs Trusts.
What Is a Special Needs Trust?
A Special Needs Trust is an irrevocable trust designed to hold assets for a person receiving needs-based government benefits. The person who benefits from the trust is the “beneficiary.” Typically, the beneficiary is an individual with physical or mental disabilities who qualify for needs-based benefits, such as Medicaid. Giving this person money or making them an heir would disqualify them. Special Needs Trusts were created to hold assets for these people without excluding them from the benefits. A Special Needs Trust allows you to look out for your loved one by providing them with the little extras that will improve their life.
Special Needs Trusts Allow the Beneficiary to Benefit From Trust Assets Without Being Disqualified From Needs-Based Benefits.
The Trust’s Trustee looks out for your loved one. Because many people with physical and mental disabilities are not able to manage money, they need help. A Special Needs Trust allow you to pick someone to help. This helper can be a family member or a professional Trustee. This person then manages the assets for the Beneficiary. Think of the Trust providing your loved one a protective wall. This wall provides shelter from waste, abuse, and theft. While protecting the assets, the Trustee has the discretion to use the trust’s funds to make your loved one’s life better.
Further, Use a Protector to Avoid Theft, Abuse, and Waste.
An additional layer of protection is possible by naming a Trust Protector. This Trust Protector is typically a person who will look out for the beneficiary but does not wish to serve as Trustee. The Trust Protector can monitor the Trustee with the right to remove and replace the Trustee at any time. For example, the Special Needs Person’s sibling is a good candidate for Protector. Typically, as Trustee, the sibling would be in the uncomfortable position of perhaps denying the Special Needs Person funds. This denial could lead to a rift between the Special Needs Person and the sibling. Further, the sibling would be responsible for tax returns and investing trust assets. These are not skills most siblings possess.
Instead, as Protector, the sibling monitors the Trustee. By monitoring the trustee, the Protector can make sure the Special Needs Person is receiving the proper care. If the Protector believe the Trustee is not performing well, the Protector may promptly fire and replace the trustee. As a result, there is no hearing in court. The Protector simply removes and replaces the Trustee. Consequently, Trustees behave better and fees are controlled.
What Is a Special Needs Trust? More information.
To learn more, see my website information about Special Needs Trusts.
In conclusion, I would be happy to brainstorm ideas for a Special Needs Trust that would best address your loved one’s needs. Contact our office for a free consultation if you have further questions about Special Needs Trusts or any other Estate Planning issues.
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