What is a Special Needs Trust?
When creating an estate plan to protect the future of your loved ones, a lot goes into consideration. If you have a child or dependent with special needs, you may have concerns about how to best plan for their needs, especially after your demise. You want to do whatever possible to protect them, and that’s where special needs trusts come in.
San Jose estate planning attorneys explain that tools can be part of your overall special needs planning strategy. They refer to estate planning tools designed to protect assets for individuals with disabilities while ensuring they remain eligible for government benefits, such as supplemental Security Income (SSI) and Medicaid.
Special needs trust can help your loved one with special needs receive financial support without jeopardizing their access to essential public assistance programs. If you want to incorporate the trusts in your estate plan, it would help to work with skilled special needs planning lawyers in San Jose. They can provide in-depth insights into the intricacies of the trusts.
What is the Purpose of the Funds Held in a Special Needs Trust?
Being a legal arrangement, a special needs trust holds assets for the benefit of the named beneficiary. The primary purpose is to supplement government benefits by catering to additional expenses such as the following:
- Education and training programs
- Medical and dental care costs not covered by Medicaid
- Assistive medical devices and technology
- Personal care attendants and therapy
- Housing expenses beyond what is provided by the government
- Entertainment, recreation, and travel expenses to enhance the quality of life
San Jose special needs planning lawyers mention that assets held in a special needs trust don’t count towards the beneficiary’s assets. Therefore, they help maintain eligibility for needs-based government benefits.
What Are the Different Types of Special Needs Trusts?
Before creating a special needs trust, it’s vital to understand the different types and their purposes. With this knowledge, you can align your loved one’s needs with your overall estate planning goals. Estate planning lawyers in San Jose provide an overview of the different types:
First-Party Special Needs Trust
This kind of trust comprises assets belonging to an individual with special needs. Examples are inheritances, savings in the beneficiary’s name, or personal injury settlements. The trust aims to protect the beneficiary’s assets while preserving their eligibility for government benefits.
Upon the beneficiary’s demise, any remaining assets must be transferred to Medicaid as reimbursement for services provided. The beneficiary, a parent, a guardian, or a court can create a first-party special needs trust.
Third-Party Special Needs Trust
The trust can be established by anyone except the beneficiary using assets from someone other than the beneficiary. Its purpose is to provide long-term financial security without affecting the beneficiary’s eligibility for government benefits. It is ideal for parents or relatives supporting a loved one with special needs.
A key difference between the first-party and third-party special needs trust is that the latter’s remaining assets can be distributed to other heirs upon the beneficiary’s death. There is no medical payback requirement attached to the trust.
Pooled Special Needs Trust
A non-profit organization manages this type of trust and draws resources from multiple beneficiaries. While each beneficiary has a separate account, they benefit from collective investment management. The trust is ideal for beneficiaries with smaller assets who need professional trust management.
A pooled special needs trust can be created by the beneficiary, family members, or a guardian. Like a first-party special needs trust, the remaining funds are paid back to Medicaid upon the beneficiary’s passing.
What Are the Steps Involved in Setting Up a Special Needs Trust?
Special needs trust lawyers in San Jose say establishing a trust can be complex. However, with legal assistance, you can successfully navigate the following crucial steps:
- Determine the correct type of special needs trust: Your choice depends on factors such as your estate size, budget for trust planning and maintenance, and customized needs.
- Choose a trustee: You need a trustee to manage the fund. The individual can be a family member, friend, professional, or non-profit organization.
- Draft the document: Work with skilled San Jose special needs planning lawyers to help you draft a legally binding and enforceable trust document. They can help you identify the trustee, define the trust’s purpose, and specify its management.
- Fund the trust: Once you legally establish a trust, you’re ready to make your first deposit, which could be in the form of insurance proceeds, real estate, stocks, bonds, or cash. The funding process could be ongoing for years.
- Request funds from the trust: The beneficiary or legal guardian should be empowered to request financial support when needed. Specify whether the written request should be submitted to pay for specific expenses. The trustee reviews the request to determine if it is qualified and disburses the funds appropriately.
- Monitoring and keeping records: The trustee is responsible for monitoring the trust and maintaining detailed records for compliance and auditing purposes.
- Distribute any remaining funds: Upon the beneficiary’s passing, the remaining assets will be distributed as specified in the trust document.
A Skilled Estate Planning Lawyer Helping You Secure Your Loved One’s Future with a Special Needs Trust
Establishing a special needs trust is vital to protecting the future of a loved one with disabilities. The process can be complex, but skilled special needs planning attorneys in San Jose can guide you through the legal steps.
The legal team at the Trust Law Legacy Group, APC, can help you evaluate your options when creating a special needs trust. Our knowledgeable estate planning lawyers in San Jose are dedicated to assisting families to determine the elements of estate planning that would be right for them and their loved ones. We can help you, too. Call us at 669-201-4368 for a FREE 15-minute phone consultation.
