Why consider a "Special Needs Trust"
Many of us think long and hard about estate planning. We’ve considered our assets and thought through how we want to transfer our wealth, with the least amount of taxes and difficulty, to our heirs.
But what if you want to leave your money or property to someone with a special need; a physcial disability, a mental illness, or a loved one that is simply unable to manage the assets of the estate properly. There are many reasons your loved one might be considered special needs. They may have been born with a physical or mental disability or even developed it later in life. They may be homeless, or in an assisted living facility. There are many reasons people qualify for government assistance, known as SSI or SSDI which could include subsidized housing or medicaid benefits.
Special Needs Trusts vary in form and format based on the loved one’s age, competency and other family considerations such as guardian, conservatorship, or the reciept of qualified government assistance. Generally Special Needs Trusts allow the beneficiary to supplement their government benefits to enhance the quality of life or care for their medical concerns in your absence.
Without proper planning leaving money or assets to a loved one with a disability could jeapordize your loved ones ability to receive Supplemental Social Security Income (SSI or SSDI) and/or Medicaid benefits. In most cases these government requirements limit a persons assets to $2,000 or less so inheriting any sum of money can easily jeapordize your loved ones ability to qualify for these imporant benefits.
Through the use of a Special Needs Trust your child will not have ownership or control of the estate but they can still receive the benefits of your wealth to help them survive even after you have passed on.
Like all trusts, a special needs trust is organized around three roles;
- The Settlor - Also called the grantor, usually the parent or grandparent who creates the trust and provides the money.
- The Beneficiary - The person with the special need.
- The Trustee - The fiduciary manager who oversees the money for the sole benefit of the beneficiary.
Choosing a Trustee can be one of the most difficult aspects of this process as this person can be anyone you choose; a professional financial planner, a family friend with or without legal or financial experience and even a relative or close family member that you trust with this responsibility.
You should consider a few things carefully when determining the trustee;
- The relationship of the trustee to the benefiicary, this arrangement can sometimes damage the long term relationship between the two
- The ability for the trustee to manage the process and make a long term commitment
- How comfortable you are in giving control to an outsider
- The consideration and pros and cons of hiring a professional fiduciary
- The familiarity of the trustee with the government benefit programs your loved one qualifies for
- The costs, either with a loved one or financial planner, to manage the trust over an extended period of time.