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What can and can’t a special needs trust be used for?

Hubbard Snitchler & Parzianello

Your estate plan should be tailored to suit your needs and your vision for the future. In order for you to create that kind of plan, though, you have to know what you want and the estate planning vehicles that can get you there. Figuring out both of those things can be a monumental task, especially given that you’ve never engaged in the estate planning process before.

However, if you have a loved one who requires special care, then you’ve probably already worried about how you’re going to ensure that he or she is properly provided for once you’re gone. That’s certainly stressful to think about, but there are estate planning strategies that can help you protect your loved one’s access to affordable care and treatment while still providing him or her with some semblance of financial stability. This is most often achieved through the use of a special needs trust.

How a special needs trust works

Special needs trusts protect your loved one’s ability to access Medicaid by removing trust assets from the Medicaid eligibility determination process. This means that you and your loved one can pass the costs of needed care and treatment onto this government program instead of burning through your loved one’s inheritance. The assets that you leave to your loved one through the estate, then, can be used to prop up his or her overall financial stability.

Are there limitations on how special needs trust assets can be used?

Yes. However, the list of acceptable uses of these assets is broad. Here are just some of the items that special needs trust assets can cover:

  • Medical care not covered by insurance
  • A primary residence
  • Furniture
  • Clothing
  • A vehicle
  • Special equipment, like a wheelchair
  • Education
  • Training
  • Rehabilitation
  • Some recreational activities

As you can see, the list is pretty long. Your loved one can even use funds from the trust to pay for vacations, all without having a negative impact on his or her ability to obtain governmental assistance in paying for medical care.

So, then, what can’t trust funds be used for? Perhaps the biggest restrictions come into play when cash payments are made from the trust to the named beneficiary. In these circumstances, the assets can’t be used to pay for food or housing. There may also be limitations on how much of the estate’s assets can be used to make certain allowable purchases, such as a home. It’s important that you and your beneficiary are well aware of these and other restrictions, as failing to abide by them could result in your loved one being denied access to the care that they need.

Successfully navigating your estate plan

Special needs trusts can seem pretty straightforward on their face, but in actuality, they, like other estate planning tools, come with their own unique set of nuances. This can make it difficult to navigate the process and know exactly what you need to do to bring your vision of the future into fruition.

But the last thing you want from your estate plan is confusion. That’s why it might be best to closely work with an estate planning attorney who can help advise you of your estate planning options and how best to utilize them to your and your loved ones’ advantage. Only then can you put your mind at ease knowing that your estate will be used as you see fit and that your loved ones will be protected as fully as possible.

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