People think about the loved ones they will leave behind if something ever happens to them. Some people think ahead and prepare their estate plans to protect their loved ones, even in their absence. Depending on the circumstances surrounding a person’s life, they will consider different arrangements. For instance, people with beneficiaries with a disability might look into establishing a special needs trust.
What is it?
A special needs trust is an arrangement created to benefit a person with a disability so that they can receive funds on top of government benefits. These funds can be in the form of gifts, settlements awards or other financial remedies. They are intended to pay for expenses that benefit programs do not cover, which include medical needs, hobbies, recreation and anything that would enhance the beneficiary’s quality of life.
One of the primary purposes of creating a special needs trust is to leave financial gifts without compromising the beneficiary’s eligibility for benefits they already receive. Typically, these programs set a cap on the financial resources a person can have and still qualify for assistance. Gifting them money in other ways could make them ineligible if doing so exceeds the cap.
Who can make this trust?
Typically, it is the parents or relatives of a person with a disability who sets up the trust so that they can leave assets to their beneficiary. However, individuals can also establish a self-settled trust if they become disabled because of an accident or malpractice from which they expect to receive settlement awards.
A special needs trust is just one of the trusts to consider in your estate planning. It is important to be familiar with the types of trusts and how each could benefit you and your loved ones in the long run.