If you have a loved one who has a disability, you know how challenging life can be for that person. While financial support certainly cannot fix everything, it can improve the quality of life for your disabled relative. Still, you do not want to risk your family’s wealth. A special needs trust may help you strike the right balance.
Special needs trusts hold funds for the benefit of a disabled person. These trusts are fundable through a variety of means, such as legal settlements or personal contributions. For individuals who have significant wealth, special needs trusts may also be an effective estate planning tool. Here are three advantages of forming such a trust:
- Maintain eligibility for government benefits
Your loved one may be eligible for Supplemental Security Income, Medicaid or other means-tested public benefits. If you were simply to give your relative funds, however, he or she may have too many assets to qualify. Because the trust holds financial resources, it may facilitate a better quality of life without harming benefit eligibility.
- Designate the use of financial resources
If your loved one receives government assistance, the assistance likely comes with restrictions on spending. When establishing a special needs trust, you have wide latitude in designating the use of financial resources. While the funds from a special needs trust cannot cover the same expenses as government funds, they can supplement them.
- Access a trustee’s talents
Disabled individuals may have difficulty managing financial resources effectively. With a special needs trust, a trustee takes care of this task. That is, he or she oversees investments, disbursements and other trust-related functions.
High-asset individuals have dozens of options for preserving their wealth while helping others. If you have a disabled relative, creating a special needs trust may be one of them. By understanding some common benefits of this type of estate planning, you can make the right financial decision.