The use of special needs trusts in estate planning is becoming more common than in generations gone by. A Special Needs Trust, also known as a Protective Trust, Medicaid Trust, or Supplemental Needs Trust is one created specifically for a disabled beneficiary. Often disabled children and adults are receiving government benefits such as social security and Medi-Cal. If a family member leaves money to the disabled beneficiary outright, the beneficiary could be disqualified from receiving those benefits. Anyone receiving social security disability benefits, for example, cannot have more than $2,000 in his or her name without losing their benefits.
In the past, families with disabled children would disinherit the child and leave assets to another family member who promises to use the inheritance to take care of the disabled child. The problem with that approach is that those inherited assets could be subject to creditor’s claims, lawsuits, bankruptcy, divorce settlements, and tax liens of the individual who inherited the assets. That individual could also change their mind or predecease the special needs beneficiary.
With some 5 million children in American today who have physical, emotional, and mental impairment, parents and other family members are planning ahead to create a special needs trust that will supplement, not replace, the benefits the child is already receiving. Such supplemental needs can include such things as computers, books, music lessons, camp, concert and sporting event tickets, and vacations. Assets can also be used to remodel a home or purchase a handcapped equipped vehicle.
Special Needs Trusts can be set up by parents as part of their own estate plan or by grandparents who want to leave an inheritance to a disabled grandchild. They can be funded with assets of the parents or grandparents and in some cases, with life insurance proceeds.
The estate planning lawyers at Scott C. Soady, A Professional Corporation can assist you with an estate plan that will include a special needs trust. Call us or email us with any questions or to schedule an appointment.