You may dedicate your entire life to raising a special needs loved one but do you know how they’ll get by after you’re gone? Family members and friends with special needs require extra care and protection that you will no longer be able to provide when you pass away. Make sure your final wishes are clear by knowing which Special Needs Trust (SNT) is best for your beneficiary.
Supplemental Security Income (SSI) may be a tremendous help in affording basic needs but it may not be enough to provide your loved one with the lifestyle you envisioned. A First-Party SNT offers your loved one financial support, without compromising their SSI benefits eligibility. SNTs can pay for things like education, medical & dental expenses, hobbies, or vacations, whereas an SSI account will only cover the basics: food and shelter. Special needs people who could potentially lose their government benefits due to inheritances, settlements, or more can protect their personal assets in a first-party trust. These trusts can only be established through a court proceeding and are irrevocable once established. After the beneficiary’s death, the state Medicaid agency must be reimbursed using any leftover trust funds.
Third-party SNTs work in similar ways as first-party trusts but can be created through a donor’s living trust when the donor passes away. Using a living trust to create a third-party SNT prevents the special needs beneficiary from having to go to court to establish a first-party trust when inheritance is involved. The donor can add SNT provisions directly into their living trust specifically for the SNT beneficiary. The donor can choose who acts as trustee for the SNT as well as additional options like using a Trust Protector or Trust Advisory Committee to provide additional layers of protection for the SNT beneficiary and the trust assets. Unlike a first-party trust, the funds remaining after the special needs beneficiary dies can be transferred to other beneficiaries rather than reimbursing the state. This alternative is much more flexible than a first-party trust and is a valuable tool to be used in Estate Planning.
To better assess your options, meet with the estate planning team at Heritage Law, LLP. Our experienced attorneys can advise you on the best ways to plan for your future security through wills, trusts, gifts and other estate planning tools. Contact us for a free consultation.