For parents of children with special needs or disabilities, daily life is filled with unique and challenging decisions. Planning for the future of your children can be even more complicated if they receive government benefits since the eligibility requirements for these benefits are usually very strict.
Fortunately, there are ways to protect your disabled loved one’s future without compromising vital government benefits and services. One of the most important tools available to parents and guardians of people with disabilities and special needs is a special needs trust.
What Is a Special Needs Trust?
A special needs trust holds an unlimited amount of assets on behalf of an individual with a disability or other special needs. There are two types of special needs trusts:
First-Party Special Needs Trusts
First-party special needs trusts are funded with the beneficiary’s own assets. Often, these assets come from a lawsuit in which the beneficiary was awarded damages. For example, if someone suffered a traumatic brain injury in a car accident as a result of someone else’s negligence and later received compensation from a trial or settlement, that sum could be used to fund a first-party special needs trust.
Third-Party Special Needs Trusts
Whereas the trust beneficiary funds a first-party special needs trust, third-party special needs trusts are funded by someone other than the beneficiary or their spouse. For example, parents or grandparents can contribute to a third-party trust and provide for the beneficiary’s future.
If you’re considering starting a trust for someone with special needs and you aren’t sure which type is best for your loved one, speak with an estate planning lawyer from the Phillips & Santana team today. We can help!
How Do Special Needs Trusts Protect Disabled Loved Ones?
Many people with special needs receive government assistance to help cover the cost of daily living. These benefits are needs-based, and individuals with greater means are not eligible.
A special needs trust holds assets for someone with a disability, but the disabled person doesn’t technically possess the assets as long as they’re in the trust. For people with disabilities who also rely on government benefits for therapy, housing stipends, or other services, a special needs trust preserves their current services and benefits while securing their financial future.
What Are the Requirements for a Michigan Special Needs Trust?
The law sets out several requirements for creating a special needs trust. In addition to confirming that the beneficiary receives government benefits, the beneficiary of the trust must:
- Be under the age of 65
- Be considered disabled according to the standards of the Social Security Administration
- Stand to receive a justifiable amount of funds from the trust to cover the costs of their daily life and care
In addition, the trust itself must be:
- Irrevocable, meaning you can’t undo its creation later and can only amend it under specific circumstances
- Registered with an individual Federal Tax ID number and not the Social Security number of the beneficiary or trust creator (If the trust is irrevocable, it will have its own ID number)
- Created for the benefit of someone considered legally disabled and under the age of 65
Special Needs Trusts Provide Comfort
Creating a trust can help give both you and your loved ones confidence and peace of mind. Special needs trusts can only be used for the purpose for which they were intended, meaning no one can hijack your special needs trust to pay for something else and leave your loved one without resources.
If you want to protect your assets through a trust, it’s always a good idea to consult an experienced estate planning attorney. An attorney can guide you through the process of creating essential end-of-life documents and help you decide on the right estate planning steps for you and your family.
Law Offices of Kari Santana: Helping West Michigan Families Achieve Peace of Mind Through Estate Planning
Discussing end-of-life matters can be hard, and it’s even more challenging when your family has unique and complex needs. Don’t let anxiety keep you from protecting your family. At the Law Offices of Kari Santana, we work hard to provide compassionate legal services and estate planning solutions tailored to your unique needs and circumstances.
If you need practical and cost-effective solutions for your family, don’t hesitate to contact us online or call us at 616-717-5759.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.