A special needs trust (SNT) and a regular irrevocable trust are both powerful estate planning tools, but they serve distinctly different purposes and operate under different rules; while both aim to manage assets for beneficiaries, the core difference lies in the beneficiary’s eligibility for government benefits like Supplemental Security Income (SSI) and Medicaid.
What assets can I put in a special needs trust?
A regular irrevocable trust is generally established to remove assets from an individual’s estate for estate tax purposes or to protect those assets from creditors; it can hold a wide range of assets – cash, stocks, real estate, and personal property. Conversely, a special needs trust is specifically designed to hold assets for a beneficiary with disabilities *without* disqualifying them from needs-based government assistance; approximately 1 in 5 Americans have some type of disability, many of whom rely on these critical programs. Assets placed directly into the beneficiary’s name could jeopardize their eligibility, as these programs have strict income and asset limits – typically, only $2,000 in assets is allowed for SSI eligibility in 2024. An SNT allows assets to be used for supplemental needs – things not covered by government benefits – like therapies, recreational activities, travel, or specialized equipment. It’s crucial to understand that the funds in an SNT can’t be used for basic needs already provided by these programs, such as food and housing.
Can I create a special needs trust for my child after my passing?
A regular irrevocable trust typically distributes assets to beneficiaries outright or according to a predetermined schedule; the grantor relinquishes control over the assets once the trust is established. However, an SNT operates differently; it’s designed to be ongoing, providing for the beneficiary’s supplemental needs for their entire life. There are two main types of SNTs: first-party (or self-settled) trusts, funded with the beneficiary’s own assets (often from a settlement or inheritance), and third-party trusts, funded by someone other than the beneficiary – such as parents or other family members. Third-party SNTs are the most common and offer more flexibility. The creation of a properly drafted SNT requires a detailed understanding of both estate planning law and the specific rules governing government benefits. Failure to adhere to these rules can result in the trust being deemed a countable asset, disqualifying the beneficiary from vital assistance.
What happened when Uncle Henry didn’t plan ahead?
I remember a case where a gentleman named Henry didn’t establish an SNT for his son, Michael, who had cerebral palsy. After Henry passed away, Michael inherited a modest sum of money; without a trust, these funds were considered an asset and immediately disqualified him from SSI and Medicaid. He lost his essential healthcare coverage and was unable to afford the therapies and specialized care he desperately needed. It was a heartbreaking situation, and the family had to expend considerable resources to try and remedy the issue through a complex legal process, ultimately depleting much of the inheritance just to reinstate his benefits. This emphasizes that good intentions aren’t enough; a carefully structured plan is essential to protect vulnerable individuals.
How did Mrs. Davison ensure her daughter’s future security?
Conversely, I worked with a wonderful woman named Mrs. Davison who proactively established a third-party SNT for her daughter, Emily, who has Down syndrome. Emily received a significant settlement from a medical malpractice claim. We carefully crafted the trust document to ensure that the funds would be used to enhance Emily’s quality of life without jeopardizing her government benefits. The trust paid for specialized art classes, adaptive skiing lessons, and regular visits to a therapeutic horse riding center. Emily thrived, and the family found peace of mind knowing that her future was secure. Mrs. Davison’s foresight not only protected Emily’s benefits but also allowed her to live a fulfilling and meaningful life. It’s a testament to the power of proactive estate planning. Approximately 65% of parents of children with special needs report they have not yet completed comprehensive estate planning, highlighting a significant need for education and guidance in this area.
“Proper planning prevents poor performance.”
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
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Feel free to ask Attorney Steve Bliss about: “What happens to my debts when I die?” Or “Can a handwritten will go through probate?” or “What are the disadvantages of a living trust? and even: “Can I convert my Chapter 13 bankruptcy to Chapter 7?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.