There are numerous different ways to facilitate future asset transfers. The optimal course of action will vary on a case-by-case basis, because each family is unique. With this in mind, we will look at the legal device called the special needs trust in this post, and we will examine the costs involved.
Need-Based Government Benefits
You may have someone with special needs on your inheritance list. Many people with disabilities are unable to earn income, so they have very limited financial resources. As a result, they can qualify for need-based government benefits.
Clearly, if you have a disability, you are probably going to require medical care and treatment. Medicaid is a health insurance plan that is jointly administered by the federal government along with each respective state government. This coverage is invaluable to many people with disabilities.
Supplemental Security Income is another program that is relied upon by many people with special needs. SSI provides much-needed income for individuals with disabilities who can demonstrate financial need.
Sometimes circumstances change. Someone could be deemed eligible for government benefits at a particular time, but this eligibility is not necessarily permanent. A significant change in financial status could result in a period of ineligibility.
If you were to leave a significant direct inheritance to someone who was relying on need-based government benefits, his or her eligibility could be lost.
Special Needs Trusts
A special needs trust can provide a solution. With a special needs trust, you name a trustee to administer the trust, and you name a beneficiary. Under benefit program rules, the beneficiary can use assets that have been conveyed into the trust to satisfy the supplemental needs of the beneficiary.
What are supplemental needs? These would be needs that are not being met by government benefits.
It should be noted that the beneficiary cannot direct the actions of the trust or handle the funds directly. The trustee must use the trust’s assets for approved purposes.
Ultimately, you are improving the life of the beneficiary, but you are not jeopardizing government benefit eligibility.
Cost of Trust Creation
Any time that you retain an attorney to construct legally binding documents, there are going to be some costs involved. However, if you are in a position to positively impact the life of a loved one with special needs, the costs will be relatively minimal.
Many people with special needs require care and treatment that can cost millions of dollars over the course of a lifetime. The stakes are high when you have someone with a disability on your inheritance list.
Free Special Needs Planning Report
We have prepared a free report on special needs planning. This report is specifically focused on special needs planning as it applies to children.
If you would like to obtain access to your copy, click this link and follow the simple instructions.