Although every adult should have at least a rudimentary estate plan in place, the need for a more complex and inclusive estate plan becomes clear when you become a parent for the first time. If you are the parent of a child with special needs, estate planning takes on yet another level of importance. One of the most common tools that parents of special needs children use when planning for the future is a Special Needs Trust.
If you are considering the addition of just such a trust to your estate plan, it may help to learn more about how you, and your child, can benefit from the trust. For example, what can you purchase with a Special Needs Trust? Our Phoenix special needs planning attorneys at Morris Hall PLLC explains what you can purchase with a trust of this type.
Why Might a Special Needs Trust Be Necessary?
As a parent, you have a legal and moral obligation to provide for your child’s care and maintenance until your child reaches the age of majority. Many parents also choose to continue to provide financial support to their children long after they become adults. If you are the parent of a child with special needs, providing that financial support is both more important and more complicated. Simply gifting funds or assets to your child, either while you are alive or upon your death, is not an option as it would be for a child without special needs. Your child will likely depend on the assistance provided by Medicaid, SSI, and other government programs for his/her entire life. Eligibility for those programs is determined, in part, by an applicant’s income and assets. Your direct gifts, therefore, could cause your child to lose his/her eligibility for assistance. Special needs planning uses estate planning tools and strategies to get around this obstacle and allow you to continue to provide for your child without jeopardizing his/her eligibility for assistance. An SNT is one of the most popular of those tools because it is tailored to provide the financial assistance you want to provide to your child without running afoul of the asset limits imposed by government assistance programs.
How Does a Special Needs Trust Work?
A trust is a fiduciary legal arrangement that allows a third party, referred to as a Trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. A Special Needs Trust, also referred to as a “Supplemental” Needs Trust or shortened to “SNT,” is a specialized irrevocable living trust. A living trust is a trust that activates while the Settlor (creator) is alive, in contrast to a testamentary trust that is activated by a provision in the Settlor’s Last Will and Testament. Living trusts can be further sub-divided into revocable and irrevocable living trusts.
For a trust to be recognized as a special needs trust by SSI, Medicaid, or other assistance programs, very specific language must be used and the trust must be drafted properly, which is one of the many reasons it is in your best interest to work closely with an experienced special needs planning lawyer when you create your trust. Once created, you can transfer assets into the trust to be used to supplement the care provided to your child by programs such as SSI and Medicaid.
Government assistance programs are designed to provide only critical necessities to recipients. Things that improve the recipient’s quality of life are not provided by these programs. This is where a Special Needs Trust can help. Funds held in the SNT can be used to purchase extras that are not provided by assistance programs, such as a vehicle, a vacation, or furniture. Educational expenses, a computer, or even a cell phone can be paid for out of the trust as can medical expenses not covered by Medicaid. Another advantage of creating a properly drafted SNT is that it can be used by the entire family to provide for your child both during your lifetime and after you are gone.
Contact a Phoenix Special Needs Planning Attorney
If you have additional questions or concerns, contact the experienced Phoenix special needs planning attorneys at Morris Hall PLLC by calling 888-222-1328 to schedule your free consultation today. Our attorneys and caring staff are here to help you understand and create a lasting legacy for those you love.
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