When you set up your estate plan, whether it is a Last Will and Testament or a Revocable Living Trust, it is important to give consideration to a family member or members who are receiving government benefits, such as Social Security Income, Medicaid, Housing Benefits or Financial Aide. This includes a child, grandchild, niece or nephew. Failure to bring these facts to light could result in a disruption of benefits upon the receipt of an inheritance.
In order to prevent such a disruption, the attorney will draft a Special Needs Trust in your estate plan to direct an inheritance into the trust. The funds in the Special Needs Trusts can be used for needs above and beyond food, shelter and medical. Remember when setting up your estate plan to update the beneficiaries of all life insurance policies and retirement assets to name the Special Needs Trust as a beneficiary.
Once your estate plan is in order then you may want to consider a Stand Alone Special Needs Trust for your loved one. A Stand Alone Special Needs Trust is used to transfer assets to your family member outside of your estate plan. An example of this would be gifts from you or another family member. Instead of giving the money directly to your developmentally disabled loved one, the money can be placed in a trust for their use.
Suppose your family member receives a large inheritance or other influx of money that would disrupts their important benefits. All is not lost. A D4(a) Trust or a D4(c) Trust can be set up to ensure that your loved one’s government benefits are protected. Many technical and legal requirements must be met to make sure these types of trusts are set up properly.
Lastly, another important Special Needs Trust is the (c)(2)(B)(iv) Trust. The (c)(2)(B)(iv) Trust is created by a parent for the benefit of a disabled child. It is often used to preserve assets for the child when the parent needs Nursing Home Medical Assistance.
For your information, the latter three trusts are named after the Federal statute that authorizes the trust.
There are many options available for your child or loved one receiving needs-based government benefits to ensure the benefits continue now and in the future. An appointment with an attorney familiar with Special Needs planning will greatly benefit you and your loved ones.
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