One of the worse things that can happen to a disabled person is for them to receive an inheritance. Your disabled family member may be eligible for a number of government programs and benefits, and an inheritance could cause them to become ineligible. So the question people often ask is the same question a recent article in the Pauls Valley Democrat asked – “Can your family benefit from a special needs trust?”
The article reminds us that these programs often don’t cover everything. You may need to close the gaps. A few government programs have eligibility restrictions, based on the level of financial assets that are available to the recipient — which means receipt of an inheritance may do more harm than good – unless you establish a special needs trust.
Under the terms of a properly drafted Special Needs Trust (also called a Supplemental Needs Trust), as the donor, you supply the funds. A trustee then holds and administers them, according to your instructions. The beneficiary typically can’t use the trust for basic support or to receive benefits that can be provided by the government. The special needs trust can be used to provide specialized therapy, special equipment, recreational outings and other expenses.
When considering a special needs trust, you’ll need to look at several issues with your attorney. However, there are two that are critical. The first is designating a trustee. You could name a family member or close friend as a trustee. While this works well for many, it has the potential to cause family conflicts. You could also name a trust company. This company can provide professional management, expertise and continuity of administration. A third option is to name an individual and a trust company as trustees.
The second critical issue with a special needs trust is funding the trust. You can fund the trust during your lifetime or have it activated when you die.
Note that you don’t have to be the sole donor. A special needs trust can be created so other family members can also contribute to it. The trust can be funded with securities (stocks and bonds), IRA proceeds, insurance death benefits and other assets.
You’ll need to understand the requirements of various federal, state and local benefit programs for people with disabilities, so that your loved one’s benefits are not at risk.
Speak with an experienced elder law or estate planning attorney about how you can to make life better for a disabled child or family member with a special needs trust.
Reference: Pauls Valley (OK) Democrat (August 1, 2019) “Can your family benefit from a special needs trust?”