Special Needs Trust and Why Do I Need One?

There are many families with a special needs child or family member, and they worry about how their child or family member will receive the appropriate care for their lifetime, especially if when they are gone. Many special needs children or family members with disabilities are receiving some type of government benefits such as Medicaid or Social Security Disability. However, sometimes a parent or concerned family member doesn’t believe Medicaid and Social Security Disability is enough and want to do more to support their loved one. The government has income and asset restrictions for those on Medicaid and / or Social Security Disability so if a loved one was to be given money during the lifetime as a gift or inheritance, they could lose their government benefit. This is when working with a top Grand Rapids estate planning attorney could benefit you and your loved one.

A top Grand Rapids estate planning attorney could draft what we call a Special Needs Trust or Supplemental Needs Trust. A Special Needs Trust is a way for an individual or their family member to give or leave money to their disabled loved one without worrying about them losing their governmental benefit. However, if you choose to set up a Special Needs Trust, the government has set up certain rules to ensure the disabled family member does not have direct access to those funds, otherwise, again the disabled loved one could lose their benefit. So, what is a Special Needs Trust?

A Special Needs Trust is an irrevocable trust designed to supplement the income and need of a disabled individual without them losing their governmental benefits, such as Medicaid or Social Security Disability. Once a Special Need Trust is executed, no changes may be made to the trust. The Special Needs Trust must for the benefit of specific individual with disabilities and that individual cannot have direct access to the funds held in the trust.

There are three parties to a Special Needs Trust. There is a Settlor, a Beneficiary, and a Trustee. The Settlor is the induvial who is creating the trust to help and protect their family member. A Settlor is often also called a Grantor. The Settlor is the individual who will fund the trust or in other words, put money in the trust. A beneficiary of the trust is the special needs loved one for who the trust is being set up to supplement and maximize their government benefit without fear of losing it. Lastly, the Trustee of the trust is the individual responsible for managing the trust and its assets. It is the Trustee’s duty to ensure the special needs loved is not only be taken care of but they are responsible for managing and handling the money in the trust in a way to make sure the disabled loved one does not lose their governmental benefit. If a beneficiary is in need of housing, a car, therapy, school, furniture, vacations, or etc.; the beneficiary will go to the trustee and make a request. The trustee will then use the funds in the Special Needs Trust to pay for requests directly. No funds are ever given directly to the beneficiary.

These types of trusts are very complex and if it is not drafted properly, it can jeopardize your loved one’s governmental benefits. At the Law Office of Sean Patrick Cox, PLLC, our attorneys proudly serve West Michigan families in drafting their estate plans to avoid these types of situations. Most importantly if families find themselves in this situation, we can help guide them through the process and get them to the other side, worry-free.

We offer free consultations. To get in touch with the Top Grand Rapids Estate Planning Attorney call (616) 942-6404