As you begin working on estate planning, you may find yourself worrying about the way your will or trust can impact your loved one’s access to government benefits. Without these essential benefits, they may struggle to afford crucial healthcare, services, and more. While this can be daunting, the use of a Special Needs Trust can keep your loved ones safe and cared for, even after you’ve passed away.
If your loved one relies on essential government benefits and you want to learn more about how establishing a Special Needs Trust can keep them safe, keep reading.
What is a Special Needs Trust?
A Special Needs Trust (SNT) is an essential document that provides an individual with access to funds while protecting their eligibility for vital government benefits. The assets within the trust aren’t owned by the trustee, allowing them to maintain access to any benefits that may otherwise have asset limits, like SSI, SNAP, and Medicaid. If you believe an SNT is a good option for your loved one, there are two main options you can choose between, including:
- First-Party Trust: This trust must be established before the individual is 65 and may be funded through personal injury settlements or inheritance. With a first-party SNT, the trust must reimburse Medicaid at the time of the beneficiary’s death or when the trust is terminated. Additionally, this trust must be irrevocable.
- Third-Party Trust: These trusts are directly funded by gifts, inheritance, or life insurance policies. Unlike first-party trusts, paying back Medicaid upon the trust’s termination is not required. However, these trusts cannot hold any funds owned by the beneficiary, making it difficult if they receive a settlement payment.
Each option comes with its benefits, making it essential that you go over your wants and needs with a trusted estate planning attorney. They can determine which is a better option for you and your loved ones, ensuring they are cared for when you aren’t around to offer essential support.
The Key Benefits of an SNT
There are many reasons why a family may choose to utilize an SNT. The major benefits of establishing these trusts for your loved ones include:
- Provides Financial Security: These trusts ensure funds are managed and used appropriately to enhance an individual’s quality of life.
- Customizable for Specific Needs: When establishing an SNT, you can tailor it to cover supplemental expenses not covered by government programs.
- Avoids Financial Exploitation: An SNT protects assets from misuse or mismanagement by ensuring a trustee oversees the distribution of funds.
- Preserves Government Benefits: The biggest benefit of these trusts is their ability to protect access to government benefits. With an SNT, individuals with disabilities can receive financial assistance without risking their SSI, Medicaid, and more.
How an SNT Preserves Access to Government Benefits
When an individual applies for government benefits, there are incredibly strict income and asset limits. For benefits like SSI, an individual may make no more than $2,019 each month to qualify. If this individual directly inherits money or receives a financial gift, this may disqualify them from these essential benefits, putting them in a precarious economic situation.
By placing assets in an SNT, a trustee manages and distributes funds on behalf of the individual without risking their access to government benefits. But how does the trust preserve this access? When the funds are placed in a trust, the trust owns the assets, which are not counted toward eligibility limits.
These funds can be used to enhance the beneficiary’s quality of life, including medical treatments not covered by insurance, personal care attendants, education, recreation, and travel. If your loved one receives these benefits and you want to protect them, utilizing an SNT is essential.
How to Establish an SNT
If you’re considering establishing an SNT, it is always best to work with a reliable and experienced estate planning attorney. With their guidance, you can ensure the trust is structured correctly to comply with state and federal laws. There are a few steps to this process, and it will follow this process:
- Determine the Appropriate SNT: Your estate planning attorney will discuss the needs of the individual to ensure the chosen trust is the right fit for their everyday needs.
- Select a Reliable Trustee: There are several options for a trustee, including a loved one, a friend, or your estate planning team.
- Funding the Trust: Your team will determine how much and what kind of assets will be placed in the trust to ensure it serves its intended purpose.
- Outlining Fund Needs and Use: Finally, they establish a plan for distribution to help prevent misuse and ensure the trust enhances your loved one’s quality of life.
Helping You Protect Your Loved Ones
For families with loved ones with disabilities, a Special Needs Trust is an invaluable tool to ensure their financial security while maintaining access to essential government benefits. By working with an experienced estate planning attorney, you can ensure your loved one’s future remains secure, providing them with the care and support they deserve.
If you’re considering establishing an SNT for your loved one in the Northern Utah area, turn to our team at Bishop Estate Law. For years, we’ve provided families across the area with reliable, compassionate estate planning services. With our support, you can trust that your loved one’s access to government benefits will be preserved, and they receive care for years to come.
If you’re interested in learning more about SNTs or would like to establish a trust for your loved one, don’t hesitate to contact us today.