A special needs trust can be a very useful estate planning device when certain circumstances exist.
Many people who have disabilities rely on government benefit programs like Medicaid and Supplemental Security Income. These programs are only available to people with significant financial need. A direct inheritance can result in a loss of benefits, and you can react to this scenario through the creation of a special needs trust.
First Party Special Needs Trust
A trust that is funded with assets that are the property of the person who will benefit from the trust is called a first party or self-settled special needs trust. With this type of trust, a trustee is named in the trust declaration. People often use a professional fiduciary to act as trustee, such as a trust company or the trust section of a bank.
When you use a corporate trustee, you gain certain advantages. For one, the trustee will be fully cognizant of the rules that govern special needs trusts. Secondly, there will be no conflicts of interest, and there would be no longevity concerns.
The beneficiary of the trust cannot directly handle the assets that have been conveyed into it. However, the trustee can use the assets in the trust to satisfy the supplemental needs of the beneficiary without impacting government benefit eligibility.
What are supplemental needs? The government benefit programs do not necessarily cover everything that the beneficiary may require. The gaps are referred to as supplemental needs.
When a first party or self-settled special needs trust has been established, Medicaid eligibility would not be disrupted during the life of the beneficiary. The beneficiary could also continue to draw Supplemental Security Income payouts. However, after the death of the beneficiary, the Medicaid program would seek recovery for monies spent from the beneficiary’s estate.
There is another type of special needs trust called a third party special needs trust. This type of trust is funded by someone other than the beneficiary. When a third party special needs trust has been established, the supplemental needs of the beneficiary could be satisfied through the utilization of assets in the trust without jeopardizing ongoing benefit eligibility.
However, after the death of the beneficiary, the Medicaid program would not seek reimbursement from his or her estate.
Special Needs Trust Report
We have provided some basic information in this blog post, but you can learn more about special needs trusts if you download our in-depth report.
This report is being offered to our readers on a complimentary basis at the present time, and you can access your copy through this website.
To get your copy of the special report, click this link and follow the simple instructions: Hartford CT Special Needs Planning.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.
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