As a parent of a child with special needs, you understand the importance of ensuring your loved one is cared for and can live a fulfilling life after you pass away. One effective way to achieve this is by creating a special needs trust. When established correctly, a special needs trust can provide financial security for your child after your passing without disqualifying them from government benefits they may require. For further information about special needs trusts, contact Loughlin Law, P.A. at (561) 677-8384.
What Is a Special Needs Trust?
According to the Internal Revenue Service (IRS), a trust refers to a legal document that offers rules and specific directions for assets that are held on behalf of a beneficiary. These assets often involve bank accounts or investment accounts, such as bonds or mutual funds, or property, such as real estate.
A type of trust used in special needs planning is the special needs trust, also referred to as the supplemental needs trust. According to Florida Statutes, this trust helps parents who have a special needs child ensure their child will receive a share of their estate. It also protects the child’s future financial security and eligibility for government benefits. This is because the finances placed into a well-prepared special needs trust are not counted for purposes of determining whether an individual is eligible for certain government programs.
The Primary Objectives of a Special Needs Trust
Although a special needs trust can be set up for many reasons, in general, these trusts are created for the following reasons:
- To provide additional finances to a loved one so they can have a better quality of life.
- To ensure that assets left to a special needs beneficiary are protected from creditors or financial predators.
- To plan for the future and help avoid burdening siblings with stepping into the role of caregiver.
- To provide a child funds for their supplemental needs, including travel, transportation, hobbies, entertainment, and even costs related to motor vehicles.
More importantly, with a special needs trust, you will not have to leave your child’s inheritance to another person to oversee or worry that they will not be able to get their inheritance shares because it will disqualify them from government benefits. If you would like further information regarding a special needs trust and what it can mean for your family, consider contacting Loughlin Law, P.A. today to go over your questions.
The Advantages of a Special Needs Trust
While there are numerous benefits to a special needs trust, there are some factors you should consider before deciding whether you and your family should proceed with this trust.
The Advantages of a Special Needs Trust
A special needs trust:
- Can ensure individuals remain eligible for certain benefits.
- Can provide individuals with finances for services and care that are more than what the government provides.
- Can help protect funds from creditors.
- Can be tax-deductible.
- Makes sure that assets are used to care for a child with a disability.
The Disadvantages of a Special Needs Trust
Although there are important benefits attached to a special needs trust, it is also wise to consider some of the disadvantages that are sometimes associated with these trusts, including the following:
- The costs involved with a special needs trust can make it financially challenging for individuals to create one.
- The trust can result in the absence of independence given that the beneficiary must ask for funds from the trustee.
- Certain types of special needs trusts are subject to Medicaid’s repayment rules following the beneficiary’s death.
To better understand whether a special needs trust would work for you and your family, consider discussing the matter with an experienced Florida estate planning and probate attorney. These legal professionals can review each of these pros and cons and provide you with more details so you can make a sound decision on whether this trust would be an option for you.
Two Different Kinds of Special Needs Trusts
There are two basic kinds of special needs trusts: first-party and third-party. Most parents tend to set up a third-party special needs trust for their child, which means the trust will be funded by someone other than the child or beneficiary. In comparison, first-party special needs trusts are used when a disabled individual needs to place their own assets into the trust so that they can preserve their Supplemental Security Income (SSI) and Medicaid eligibility.
The Parties Involved in a Special Needs Trust
There are typically three parties involved in a special needs trust. They include the following:
This settlor is the person funding the special needs trust. These types of trusts are often supported with stocks, property, or other types of funds. After the trust has been created, the settlor will place the funds in the trust while they are alive or for disbursement after the settlor passes away.
The mentally or physically impaired individual who receives the funds from the trust is the beneficiary. This individual will not be able to have direct access to the funds.
The trustee is someone the settlor chooses to handle the special needs trust. This individual is responsible for distributing the assets to the beneficiary as they are needed and in accordance with the rules of the trust.
Regarding these roles, the trustee needs to be very careful when providing the beneficiary with distributions. Failing to follow trust distribution requirements can significantly impact a beneficiary’s governmental benefits. For further guidance regarding how these different positions operate, consider speaking with an experienced Florida estate planning and probate attorney who can walk you through each role in more detail.
Contact Loughlin Law, P.A. for More Information Regarding Special Needs Trusts
If you are a parent of a physically or developmentally disabled (Down syndrome, autism, or another developmental or intellectual disability) child, you have options that can help your family in the future. These options can also ensure that your child will be cared for even after you pass away. For further information about special needs trusts and how they can help your family, contact Loughlin Law, P.A. by calling (561) 677-8384.