The top five reasons you should consider a Special Needs Trust to protect family members with disabilities
Special Needs Trusts are designed specifically to benefit those with physical or mental disabilities and those without the ability to manage their own finances. Special Needs Trusts serve to protect the beneficiary financially and if structured appropriately, allow the beneficiary to continue to receive essential government assistance.
The trustee appointed to a Special Needs Trust can be a trustworthy family member or a third party trustee. Choosing the right trustee is vital to the success of the trust, especially when establishing a trust for a younger beneficiary.
Many families are unsure of whether or not they would benefit from a Special Needs Trust. It’s important to talk to a reputable trust company or attorney to get a better understanding of your specific situation.
Responsibilities of a Special Needs Trustee
- Managing the trust in the best interests of the beneficiary
- Keeping accurate records and preparing the appropriate reports for government programs
- eFiling necessary federal and state tax returns
- Meet beneficiaries’ personal needs not covered by government assistance
- Disperse money when necessary to enhance beneficiaries’ lives while preserving funds for as long as possible
- Uphold trust in court if necessary, and require government programs to comply with the law
- After the death of the beneficiary or termination of the trust, the trustee will manage or distribute the trust’s assets
Why Choose a Special Needs Trust
Many families are aware of Special Needs Trusts but are unsure whether it might be right for them. It’s important to talk to a trust company or an attorney to clarify your specific situation. But first, we’ve compiled the most common reasons why families establish Special Needs Trusts.
Five Common Reasons to Establish a Special Needs Trust
Protection of Assets from Creditors
Part of an effective Special Needs Trust is ensuring the protection of the beneficiary. A Special Needs Trust protects assets in the event of a lawsuit or a divorce and can protect child support payments or accumulate assets which can benefit a disabled child in the future.
A Special Needs Trust is also beneficial when a disabled person is listed as the beneficiary on a life insurance policy. Policies are often revisited during a divorce; the Special Needs Trust will protect the rights of a disabled person listed as the beneficiary.
Allow A Beneficiary to Continue to Receive Government Assistance
We’ve seen families make the mistake of listing a disabled family member as the beneficiary of their will. Without a Special Needs Trust in place, a disabled person could lose government support, putting them at a disadvantage. Similarly, leaving assets to a disabled person that exceed $2,000 in value could also cause the loss of government support.
By directing all inheritance and life insurance benefits to a Special Needs Trust you can improve the beneficiary’s quality of life. This allows them to receive government support and services.
Preserve Family Wealth with Proper Structuring
Special Needs Trusts function similarly to other types of trusts in that they provide assets while limiting their use. When structured properly, the grantor may choose final beneficiaries for the trust after the beneficiary dies. This could include children, other relatives, or organizations.
Support Your Child Even After Your Death
A Special Needs Trust can earmark assets to support beneficiaries and provide for a variety of needs. These assets can support the beneficiary while the grantor is still alive or continue the beneficiary’s quality of life after the grantor’s death.
Ensure proper use of assets
Properly structuring a Special Needs Trust and choosing the right trustee ensures that a disabled family member will benefit from trust assets for a long time. A Special Needs Trust ensures that trustees use assets in the best interest of the beneficiary and still allow them to receive essential government services.
When paid directly into a Special Needs Trust, the government excludes assets from aid calculations. This allows beneficiaries to receive government aid even with wealth in the Special Needs Trust.
Get Started With a Special Needs Trust
If you have a family member with special needs, you may be putting them at risk by leaving them a portion of your assets in a will. When you establish a Special Needs Trust, you ensure that your family member is properly taken care of.
The structuring of a Special Needs Trust is fundamental to ensure there is no loss of services and that your family member is protected. Contact Alliance Trust Company of Nevada so we can talk to you about your specific situation and go over all of your options.