Top Reasons to Consider a Special Needs Trust

Everyone should carefully plan for the eventual reality of passing down your assets to those you leave behind. However, when you’re the parent or guardian of someone with special needs, careful planning isn’t just a suggestion; it’s a requirement to protect a child or grandchild’s governmental public entitlements benefits. Fortunately, states and the federal government have offered a helping hand through ABLE accounts, and savvy parents and guardians now are using those as a first step in creating an estate plan that will care for your loved one long after you’re gone. After setting aside money for an ABLE account, you’re not quite finished yet. Financial experts recommend creating a special needs trust for your child or grandchild. Here are some of the reasons why.

Even though your assets may fall short of the $11.18 million (married exclusion is double) estate tax lifetime exclusion, you still must consider income caps and assets for your special needs heirs who receive Medicaid or Social Security.

Protecting Assistance Program Access

A Special Needs Trust is designed specifically for a beneficiary who is disabled, and they are carefully crafted to provide for your loved ones’ care and needs without eliminating their access to government programs. Because many of those programs have income caps and asset caps, listing your child with a disability as an heir can be detriment. A special needs trust, also called a supplemental needs trust, directs inheritance to trust that can be used throughout your loved ones’ life without causing him or her to lose access to Social Security, Medicaid or other government programs or subsidies.

Shielding Assets

All trusts give you the ability to give your assets to loved ones while limiting their use. A special needs trust does one more thing: It creates a structure for the use of your assets. It may also allow you to redirect your assets to different beneficiaries after the death of your beneficiary. These trusts, overseen by a trustee or trustees, can be shielded from creditors or lenders. Whether your trust is managed by loving family members or a special needs estate planner, it will provide an extra measure of security and peace of mind.

Trust Funding

There are handful of special needs trusts and a number of ways each can be funded. A trust advisor at Ibar can walk you through some of the most common ones, including inheritances and legal settlements. It can be confusing and getting it right is critical to providing ongoing care for a loved one after you’re gone and protecting your assets. An attorney isn’t required to set up a special needs trust, but it’s wise to seek the counsel of someone experienced in dealing with tax and estate planning details in situations involving recipients with special needs.

If you’re the guardian of someone with special needs, considering how to care for them in the event of your death is a stressful reality. From concerns about government assistance program eligibility to making sure their needs are met are things that can keep you awake at night. Though a special needs trust requires extra, diligent planning, an estate planning attorney who is very well versed in the intricacies of special needs trusts can ensure that you get the details right and your assets and your loved one is protected. A special needs trust can be a vital tool for your loved ones’ financial wellbeing.