What is a special needs trust and how do I know if I need to create one

Legally reviewed by:
King Law
June 12, 2023

If someone you love and wish to provide for has a disability, a special needs trust may be the ideal way to do so. Estate planning is complex and there are many ways to transfer your assets to others both in life and at death.

Trusts are an arrangement in which the person planning their estate chooses to set assets aside for someone else but wishes for a third party to manage them. A “special needs” trust is just that where the desired beneficiary is disabled.

Special needs trusts are important because first, a third party, known as a trustee, is making the decisions on when and how assets are distributed to your loved one. It may be stressful to imagine your loved one is responsible for navigating such a complicated situation without your assistance; this may reduce that stress.

Additionally, because the assets go into this specific type of trust, the assets within it will not impact your loved one’s ability to qualify for benefits such as Medicaid. Public assistance programs are commonly based on need, particularly financial need. Your wish to provide direction for your loved one who has a disability may harm them as the things given to them could be calculated in the financial need assessment and disqualify them from receiving needed assistance.

Setting up a special needs trust for your loved one and naming this trust the beneficiary rather than naming the individual is known as a third-party special needs trust. This prevents the assets from being part of the financial need calculation for benefits entirely. You may then name someone you trust to serve as the trustee or the person who oversees the trust once it is created. If you choose not to do so, the court will designate a trustee when the time comes.

If you or a loved one has already been named the beneficiary of assets and is now looking to put them into special needs trust, that may also be done by creating a self-settled special needs trust. The difference between this and naming the trust directly is that upon the individual with the disability’s death, they will need to repay the assistance received during life. Beneficiaries of a third-party special needs trust will not need to pay back.

Despite the trust being separated from your loved one’s finances, the trust’s purpose is still to take care of them. Some limitations exist on how the trust assets may be used but there are still many options. For example, you may permit the trustee to use the assets for medical equipment, health and life insurance, and home care services not covered by other sources.

Estate administration is complicated, which is why hiring an attorney to guide you through the process is highly encouraged. The attorneys at King Law have years of experience and are highly knowledgeable in the area of estate administration and planning and are available to guide you through this difficult process. Call King Law today at 888-748-KING (5464).

Legally reviewed by:
King Law
Carolina Attorneys
June 12, 2023

This blog post has been reviewed and verified by legal experts at King Law. Our team is dedicated to providing premium legal services with compassion, innovation, trust, and advocacy. Serving Western North Carolina and Upstate South Carolina, we offer flexible meeting options and strive to exceed client expectations with high-quality legal representation and exceptional client relationships.

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