A special needs trust is a type of trust you can use in your estate plan. It allows you to set aside financial assets. You name an individual who has special needs as the beneficiary of the trust, and you also select a trustee who will handle the fund for them, authorizing payouts and managing related responsibilities.
On one hand, this is a convenient way to organize your estate plan and allocate funds for a certain purpose. By selecting a trustee, you know that you have chosen someone who will uphold your wishes as the grantor of the trust, but who will also focus on the beneficiary’s best interests. Depending on the reason for the trust or the condition they have, they may not be able to manage this on their own, so the trustee’s role is crucial. But there is also a bigger advantage: protecting benefits.
Access to government benefits
In many cases, people with special needs will qualify for certain government benefits. These may help them cover necessary costs like food or housing.
But to get those benefits, they have to pass a means test. Someone who has too many assets or too high of an income level is not going to pass the means test and will be disqualified from the benefits.
In other words, leaving them an inheritance directly could inadvertently disqualify them from these benefits until they spend all of the inheritance and then qualify once again. But putting the money in a special needs trust means that they still pass the means test and can get the benefits they need, while the trustee can use the funds from the trust to help with any additional costs or financial needs.
If you are interested in using a trust in your estate plan, carefully consider all of the necessary legal requirements.