Most parents try to do the right thing for their children when creating an estate plan. Providing for the security and well-being of loved ones is a primary motivator for people creating their own wills. When a member of your family has special needs, however, standard estate planning strategies that rely mostly on a last will may not be adequate for your family’s unique needs.
For example, a standard inheritance given to a family member with a condition that impacts their cognitive acuity could wind up wasted on frivolous spending instead of providing years of security. Even if you trust your special needs family member to handle the money or assets you leave them responsibly, receiving those assets in a lump-sum inheritance could keep them from receiving any state benefits in the future, such as Medicaid.
Creating and properly funding a special needs trust helps you avoid both of these potential estate planning pitfalls.
A trust gives you control over the use of assets
If your loved one has a special need that affects their maturity or cognitive ability, they may not be able to properly budget and plan for future expenses. When you leave behind a substantial amount of money to a loved one, you likely hope that it will provide them with stability and security for many years.
By creating a special needs trust, you can control how your loved one spends the resources you leave them. You can also place limits on how much they can withdraw at any given time to protect a nest egg for them.
How strict the limitations you place on the trust should be will vary depending on your family member’s condition, the amount of money you leave them and what other support and resources they have available.
So long as you name someone responsible and trustworthy as trustee, you can enjoy the peace of mind that comes from knowing that you are leaving enough behind to care for your loved one for many years after your death.
Special needs trusts won’t keep your loved one from important state benefits
Many adults with special needs receive benefits such as housing stipends or Medicaid as a result of their condition. Those benefits are often very important. For example, many private insurance companies and Medicare will not cover residential care or in-home nursing, both of which people with special needs may require.
Medicaid will cover those costs, but a large inheritance could prevent someone from qualifying for Medicaid for some time unless they pay a large amount of money out-of-pocket. State benefits are often of particular importance in families where there are no other children or where it is known that the special needs family member will be in an assisted living facility or adult foster care.
Talking with an experienced North Carolina estate planning attorney can help you explore the option of creating and funding a special needs trust.