Modern society has a safety net to help those who cannot provide for themselves financially. If you have a friend or relative who has a disability, he or she may rely on Supplemental Security Income, Medicaid or another means-tested government program to make ends meet.
If you want to use your estate plan to help your loved one, you face a conundrum. By gifting money or other assets, you may inadvertently render your relative or friend ineligible for government help. That is, because of your gift, he or she may have too many assets to qualify for need-based financial assistance. A special needs trust may solve this problem.
The purpose of a special needs trust
A special needs trust is an important estate planning tool. This type of trust maintains funds for the benefit of your loved one with a disability rather than transferring ownership to him or her. Consequently, funds in the trust do not typically constitute income for purposes of securing government assistance.
The benefit of a special needs trustee
Starting a special needs trust has another key benefit. Specifically, you retain some control over how your friend or relative uses the funds.
When you establish the trust, you choose a competent and responsible trustee to supervise it. Not only does this trustee perform important bookkeeping and reporting functions, but he or she also invests the trust to help it grow.
Additionally, the trustee must approve all disbursements from the trust. This job responsible allows the trustee to assist your loved one with a disability with accessing necessary services or purchasing items that enhance his or her quality of life.