If you have a loved one with a disability, it helps to tailor your estate plans accordingly to protect their interest and well-being long after you are gone. A special needs trust (SNT) can help you do this.
An SNT works like most irrevocable trusts. It is managed by a trustee responsible for handling the assets according to the terms of the trust document. The trustee is legally obligated to administer the trust responsibly and for your loved one’s benefit. Here are some ways an SNT can support your vulnerable loved one.
Preserving government benefits
One of the key benefits of an SNT is that it allows your loved one to maintain their eligibility for essential government benefits like Supplemental Security Income (SSI) and Medicaid while covering a wide range of expenses that improve their well-being and independence. Direct gifts or inheritances could push them over the asset limits for these benefits, making them ineligible.
Protecting assets
Assets in an SNT cannot be sold, transferred to third parties or change hands; they exclusively belong to the trust. They are also safe from lawsuits and other court actions. Creditors cannot repossess trust assets to recover a debt owed by your loved one, neither are the assets subject to division during divorce.
An SNT can also include specific guidelines for how the funds should be used, reducing the risk of mismanagement or misuse. This ensures that trust assets are solely directed toward enhancing the quality of life for your loved one.
Creating a special needs trust can provide a lasting legacy of care and support for your loved one. However, you must do everything right from a legal perspective to ensure the trust is valid and enforceable. Seeking informed guidance can help you understand how an SNT can complement your estate plans and how to make the most one.