If you have a loved one with a disability, you’re probably already familiar with the cost of caring for them. But while you may have these costs covered for now, you may have concerns about how they’ll be dealt with later. What will happen as your loved one gets older? What if they will need a different level of specialized care? A special needs trust can allow you to plan for your loved one’s future. It ensures that they are supported financially after you have passed without putting their government benefits at risk. But what is a special needs trust and what are the advantages of having one?
What Are the Advantages of a Special Needs Trust?
A special needs trust allows an individual with certain illnesses or disabilities to hold a limitless amount of assets in the trust for their benefit. This is advantageous in two ways:
Qualifying for Government Benefits
Adults with special needs often require government benefits to cover the cost of care and living expenses. This support could include Medicaid, Supplemental Security Income (SSI), and subsidized housing. Eligibility for these government programs is need-based, so they are not open to those with assets above a certain threshold. An inheritance you leave to your loved one with special needs could disqualify them from later receiving government benefits. However, by leaving assets in a special needs trust, you can care for your loved one without jeopardizing their benefits.
Covering Your Loved One’s Future Care Costs
You can ensure all of your loved one’s future needs are covered by setting up a special needs trust. By maintaining your loved one’s eligibility for benefits, you can have Medicaid cover healthcare and SSI cover food and shelter. The special needs trust will then cover other special or supplemental needs. Furthermore, if the trust’s assets aren’t spent during the beneficiary’s lifetime, they will pass on to other loved ones.
Appointing Someone Who Can Oversee the Trust
To set up a special needs trust, you will have to appoint a trustee to oversee your loved one’s assets. The trustee’s job is to direct the trust funds to benefit your loved one without jeopardizing eligibility for government benefits. They will have control over the trust and must watch how money is spent on your loved one’s behalf. The trustee will not be able to give money directly to your loved one. This would interfere with Medicaid and SSI eligibility anyway. However, the trustee can use trust assets to purchase goods and services for your loved one. The trustee will also have to pay taxes, keep records, and invest trust assets.
What Can Special Needs Trust Funds Be Spent On?
Special needs trust assets can be used to cover expenses related to medical and dental care not covered by Medicaid or other sources. This may include personal attendants, training, or therapies. Trust assets can also pay for supplementary education, vacations, entertainment, transportation, cell phone and internet service, and personal property.
Note that if anyone, including the trustee, covers your loved one’s food and shelter, their SSI benefits may be lowered. This includes paying for or providing room and board, rent, or utilities. It doesn’t matter if the support is given in the form of gift certificates, money, or actual food or property.
How Do You Set Up and Fund a Special Needs Trust?
The first step in setting up a special needs trust is to hire an experienced special needs trust attorney. They will take the guesswork out of the process for you, making sure your time and money is well-spent.
Your attorney can then draft the trust document. A good special needs trust lawyer will ensure that basic legal requirements are met by setting the trust up to be irrevocable. They will also make sure the trust is a separate entity with its own Federal Identification Number.
The trust becomes effective when it’s been signed and notarized. Once the IRS provides the trust’s tax identification number, you can open a bank account in the trust’s name. This allows you to fund the trust.
Anyone but the trust’s beneficiary can fund a special needs trust. It can be funded through their wills, living trusts, beneficiary designations, and other estate planning tools.
An Indianapolis Special Needs Trust Lawyer Can Help You Protect Your Loved Ones
At Barnes Cadwell Law, we understand that caring for your loved one’s special needs is a top priority. We will work with you to customize a special needs trust to your needs. It’s never too soon to set up a special needs trust for the benefit of your loved one. Contact us today to learn more about how we can help.