Trying to ensure the long-term care and financial security of a loved one with special needs can result in unique estate planning challenges. It requires careful consideration to strike a balance between providing support and preserving crucial government benefits.
One valuable tool that can help you navigate these complexities is a special needs trust.
The Structure Of A Special Needs Trust
A special needs trust operates similarly to others. It involves three key parties: the creator or settlor, the trustee and the beneficiary. The creator is responsible for establishing the trust, while the trustee is entrusted with legal authority to manage the assets and finances. The beneficiary receives the benefits provided by the trust.
One major difference with a special needs trust is that trust proceeds are used only to cover certain expenses. They include:
- Recreation and entertainment
- Special equipment (wheelchairs, mobility aids, etc.)
- Electronic equipment, home appliances or personal computers
- Training and education
- Therapy or rehabilitation services
- Legal expenses, among others
It’s worth noting that your loved one will not have direct access to the trust funds to use as they wish. The trustee is responsible for distributing trust proceeds. It is one of the requirements that allow special needs trusts to be considered an exempt asset for government support programs.
The Benefits Of A Special Needs Trust
Besides retaining your loved one’s eligibility for government support, a special needs trust protects the assets from third parties. The trust is a separate legal entity distinct from the beneficiary, and creditors cannot seize assets to recover a debt owed by your loved one. Additionally, trust assets are not affected by a divorce. Most importantly, the trustee has a legal obligation to act in the best interests of the trust and its beneficiaries. You will not have to worry about mismanagement or misappropriation of trust funds due to the legal protections in place.
Seek Legal Assistance
If you have a loved one with special needs and are considering creating a trust for them, seeking legal guidance is essential. Mistakes can be costly and could void the trust, leaving your loved one in financial straits when you are gone. It’s better to be safe than sorry, especially if your efforts will affect the people you hold dear.