If you are a parent or grandparent of a child or adult with special needs, various planning tools can benefit you, including a specific trust. Creating this trust can ensure that your child has the financial resources necessary to supplement important government benefits.
If you’re considering creating one of these in Pennsylvania, the estate planning attorneys at Jones Gregg Creehan & Gerace are here to help. Working with an experienced attorney who can draft the trust in a way that accomplishes your goals and objective is crucial. Contact Jones Gregg Creehan & Gerace to schedule an initial consultation and learn more about the benefits of creating one.
What Is a Special Needs Trust?
A trust is a legal document determining how a person’s property will be divided and distributed after death. By creating one, you can designate how you’d like to distribute your money, property, and other assets according to your wishes while avoiding the probate court. When a person creates this, he or she can leave money or assets to a loved one who needs continued financial assistance in the future.
Special needs trusts allow a person to inherit money without compromising his or her eligibility for government benefits. These must be carefully drafted to ensure your loved one can take advantage of its benefits. Generally, only close relatives can create these, including parents, grandparents, and legal guardians. The trust’s beneficiary must be an individual who is “permanently and totally disabled.” There is no limit to the amount of money you can transfer into one of these trusts. You can even add to them at any time.
Keep Important Government Benefits
Several important benefits come with creating a special needs trust, with one of the most important benefits is protecting your loved one’s eligibility for government benefits. Many special-needs individuals benefit immensely from government programs, including Social Security and Medicaid. If an individual with special needs inherits a significant amount of money through a will, they could become ineligible for these benefits because they own too many assets.
Some government programs, such as Social Security benefits and Medicaid, are only available to people with minimal or nonexistent incomes. When properly created, they can allow individuals to receive income from the trust without becoming ineligible for these important benefits. In some cases, a special needs trust can be used to preserve important benefits for an elderly parent who has become disabled as well.
Additionally, the assets in the trust are protected against any potential creditors. For example, if the disabled individual is sued in a personal injury lawsuit, the judgment creditor cannot seize the assets in the special needs trust.
Third-Party Funded Special Needs Trust
Third-party-funded trusts are common in estate planning for loved ones with special needs. With these types of trust, the parent of the individual with a disability establishes the trust. A third-party trust is funded by assets owned by the person who creates the trust, not by the assets of the individual with special needs. Since the assets never belong to the individual, they are exempt from the requirements of a first-party trust. There’s also more freedom regarding how the trustee can use these funds for the beneficiary.
Self-Funded Special Needs Trust
As the name implies, a self-funded special needs trust is funded by the disabled individual’s assets. Typically, the disabled individual’s own assets, such as a personal injury settlement and inheritance or accumulated, will be transferred into the trust. Using a third party is typically the best option for caring for a loved one.
When creating a self-settled trust, it needs to include a provision that after the individual with special needs passes away, the Medicaid agency will be reimbursed for the cost of benefits that a beneficiary receives. If the rules are not followed exactly, the beneficiary may be deemed to have an income from the trust, making him or her ineligible for important benefits.
Appointing a Trustee
These allow a parent or grandparent to rest assured that their loved one will be taken care of by the trustee. When appointing a trustee, selecting someone who will place your loved one’s interests above their own is important. Individuals with disabilities are at a greater risk of being influenced or taken advantage of by others, especially regarding financial matters. The trustee has a legal obligation only to provide funds when they will be used for needs or services according to the terms laid out in the trust.
It’s important to select someone aware of the individual’s needs, understands the laws related to special needs trusts, and is financially responsible. The trustee should know how to budget, invest the assets in the trust carefully, and keep an accurate accounting of the funds within. If the trustee uses the funds for their own benefit, a third party can bring a legal claim against the trustee for breach of fiduciary duty.
Contact an Experienced Pittsburgh Special Needs Trust Attorney
The attorneys at Jones Gregg Creehan & Gerace can help you plan for the future of a child or grandchild. Creating one can help your loved one maintain government benefits as the beneficiary of the trust. One of our experienced attorneys can work with you to create a plan to fit your family’s unique goals and situation.
If you’d like to create a special needs trust for your child, or your child has inherited money or obtained a personal injury settlement, we can help protect your financial future and answer questions. Contact Jones Gregg Creehan & Gerace today to schedule an initial consultation.