There are some valuable estate planning tools available to individuals who have disabled family members, friends or other loved ones. One of these, a special needs trust, goes hand-in-hand with means-tested government programs, such as Medicaid or Supplemental Security Income.
To be eligible for many types of public financial assistance, individuals must have limited income and assets. This is a problem in the estate planning context. After all, if you give cash or other assets directly to your loved one, you may inadvertently disqualify him or her from receiving government help.
Paying for supplemental expenses
To ensure your disabled loved one remains eligible for government assistance, the special needs trust you establish may not pay for his or her ordinary living expenses. Therefore, the beneficiary should use public assistance to pay for rent, food, utilities, medical bills and other necessary expenditures.
Disbursements from the special needs cost should go to supplemental expenses, like medical copays, restaurant meals, travel costs or even recreational expenses.
Improving quality of life
Because public benefits are often meager, recipients often do not have much left over to pay for the items and experiences that make life worth living. A special needs trust improves your loved one’s quality of life by covering these expenses. Knowing this may also give you peace of mind when preparing your estate plan.
Designating a trustee
There is another major benefit of establishing a special needs trust. When you set up the trust, you designate a trustee to manage it.
This individual owes a fiduciary duty to your disabled loved one. Among other responsibilities, this duty may require the trustee to work with our loved one’s caregivers to ensure he or she receives everything necessary to thrive.