What are special needs trusts?
A trust is created when property (real estate, finances, tangible items) is managed by a person for another person’s benefit. The person managing the property is called the “trustee”. The person whose benefit it is for is called the “beneficiary”. The trust lasts as long as it is needed. This usually means the trust will go on until the beneficiary’s death or until the funds are exhausted.
Special needs trusts are made specifically for the benefit of disabled or mentally ill beneficiaries. These beneficiaries lack the mental capacity to manage their own finances. The trust is created with the specific needs, lifestyle, and future of the beneficiary in mind. Often times these special needs trusts are used to ensure that the beneficiaries don’t lose government benefits they are receiving. The trustees of special needs trusts can be family members or, if an appropriate and trustworthy family member is unavailable, a third party will be appointed by the court. Choosing the right trustee must be done very carefully, especially for special needs trusts that are used for the benefit of a younger person.
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What are the benefits of special needs trusts?
What if we are not concerned with government benefits?
The beauty of special needs trusts is that they address the specific needs of the disabled person, whereas, other types of trusts do not. Even if a family is not interested in government benefits, they should still consider a special needs trust to address those specific needs. Furthermore, you never know what the future holds. There is no sense in sacrificing government services that could be beneficial for your disabled loved one in the future.
Our family is wealthy. Do we still need to create a Special Needs Trust?
Yes. You should still establish a Special Needs Trust to protect your disabled loved one from potential creditors. If, for example, your disabled beneficiaries are ever sued in a personal injury action, the assets in the trust would not be available to the plaintiffs. Furthermore, because the funds in a Special Needs Trust are not countable as available assets for purposes of determining government benefit eligibility, more of your money can be used for those supplemental expenditures that will allow your disabled beneficiary to enjoy a higher quality of life. Otherwise, many of your assets will be used to pay for private care benefits that are extremely expensive and can drain even significant sums of money over a period of years.