It can be incredibly difficult to make enough money when living with a chronic illness or a mental disability. For some people, the best way to get through life is with the help of another person. But if you go about helping a person the wrong way, it could cost them their ability to make use of vital resources like social security benefits or Medicare.
But if you go about things with a special needs trust, it can get around these problems. Below, we’ll explore just what exactly a special needs trust is, as well as the benefits that come with setting one up. Then we’ll look at who can be a trustee in a special needs trust and some advice on how to pick the right person for yours.
What Is a Special Needs Trust?
There are many types of trusts but a special needs trust is a type of legal agreement and fiduciary relationship. It’s purpose is to let somebody with a mental or a physical disability, or somebody that is dealing with a chronic illness, be able to receive some kind of income without losing their eligibility for social security, Medicare, Medicaid, or other public assistance disability benefits.
A special needs trust is a great way to help out somebody. Say a friend or relative gets sick and can no longer work. They’re eligible to get benefits, but those benefits don’t pay them quite enough. You make enough that you can give them money, but they would have to report this and it could easily end up preventing them from getting further benefits. A special needs trust can allow you to offer help up to a certain point without incurring any negative repercussions.
A special needs trust works by allowing somebody to cover the percentage of their financial needs that are not being covered by their public assistance payments. This is because the assets held in the trust aren’t counted for the purpose of public assistance. These aren’t used for food or rent, typically, but for medical expenses, caretaker expenses, transportation costs, and a few other types of permitted expenses.
What Are the Benefits of a Special Needs Trust?
The most obvious benefit of a special needs trust is helping an individual pay for their needs without losing their benefits. But a special needs trust can also be beneficial to the party offering assistance.
A special needs trust lets the beneficiary get financial support while letting the individual who creates the trust is able to rest in the reassurance that the proceeds they give to help out are put to expenses that they’ve stipulated. This means that they know the money will be used for the intended purpose. An example of where this is obviously helpful is cases where the beneficiary has substance abuse problems on top of the rest. You can rest easy knowing the money given won’t be spent on drugs or alcohol.
Additionally, a special needs trust is irrevocable. So any money put in it, will be used for it. If you are the parent of a child with disabilities, you may start a special needs trust to put away money for their medical expenses. Even if you are bad with your money, you can rest easy knowing that any money you put in will go to helping your child. With a savings account, you can earmark money to be spent on the child but then change your mind when the impulse to spend comes over you. A special needs trust prevents you from being able to do this.
Who Can Be A Special Needs Trust Trustee?
The law is quite lenient when it comes to who can be appointed to serve as a trustee of a special needs trust. The trustee must be at least eighteen years old and have the capability of managing their own affairs. Beyond that it could be a relative, a friend, a professional like a lawyer, or pretty much anyone else.
But while the law allows pretty much anybody to be appointed, it’s pretty important to pick somebody that’ll be good for the job. The trustee is responsible for managing the day-to-day operations of the trust, such as investing assets and paying bills. Plus they need to ensure that they stay within the realms of what will allow the beneficiary to still maintain their eligibility for public benefits programs.
Some tips for picking a good trustee:
- Make sure that any potential trustee understands how a special needs trust works, as well as how the various public benefit programs work so they don’t accidentally affect the beneficiary’s eligibility
- Ensure that any potential trustee has enough time to do the job, as it can be quite demanding and those with little time on their hands might not be able to maintain their responsibilities
- Ask yourself how comfortable you are giving control over to an outsider; you may realize that you want to keep control with the family or even within your own hands
- Consider hiring an attorney or a professional that could run the trust for you and provide you with regular updates on its health; while this gives control away, regular reporting can let you rest easy knowing everything that’s going on with the trust
- Think about the reality of maintaining a special needs trust in the future; just because somebody has the time to run one now, will they always? Similarly, consider whether or not you want to make the trustee somebody younger to avoid having to replace them because of retirement, sickness or death
Is a Lawyer Necessary for a Special Needs Trust?
While a lawyer is not necessary, they are recommended. You can work with a lawyer that has knowledge on all the subjects necessary for running a special needs trust. But even if you don’t appoint an attorney as a trustee, you should work with one when drafting up the trust to ensure that it meets your requirements.
If you are looking to start a special needs trust, or even just looking for more information on setting one up, reach out to Scott Shoemaker & Associates to see how they can be of assistance today.