Froerer & Miles

Estate Planning and Special Needs Trusts

By Kelly B. Miles on March 17, 2017

A person helping someone sign a documentLeaving money to a loved one with a disability could put their ability to collect government benefits, like Medicaid or Supplemental Security Income (SSI) at risk. Estate planning with a special needs trust can help avoid jeopardizing a loved one's ability to collect government benefits related to their disability. If you plan to leave money to a loved one who depends on benefits like SSI and Medicaid, it is important to consult with an attorney to discuss estate planning and special needs trusts. Contact the Ogden, UT law firm of Froerer & Miles, P.P.C. for more information.

Protect Benefits with a Special Needs Trust

While leaving personal effects, like a car or house, to a loved one typically won't interfere with Medicaid or SSI eligibility, leaving a large sum of money can. One way to avoid impacting a loved one's ability to collect SSI or Medicaid benefits is to establish a special needs trust.

What Is a Special Needs Trust?

A special needs trust is a trust set up for a person with a disability or other special needs to receive funds without interfering with his or her ability to collect benefits from government programs. With a special needs trust, money is placed into a trust, taking the control of the money away from the party to which the money has been willed. Instead, someone is chosen to serve as trustee. This trustee is then responsible for administering funds from the trust as needed or until the trust ends, which could be when funds run out or when the beneficiary passes away. There are two main types of special needs trusts, including:

  • First-party trust: This trust is used to hold assets or funds that belong to a beneficiary with special needs, such as funds from an accident settlement or an inheritance. A first-party trust must be established by a parent, grandparent, or guardian of the beneficiary with a disability. 
  • Third-party trust: A third-party trust is the more common form of special needs trusts and may be established by any third party for the benefit of a person with a disability.

Restrictions of a Special Needs Trust

There are some restrictions of a special needs trust which exist to prevent interference with the eligibility requirements of certain government benefits programs. Trustees cannot give money from the trust directly to the beneficiary. Instead, the trustee must use the funds to buy services or goods for the beneficiary. Some common goods and services a trustee may pay for with funds from a special needs trust include physical rehabilitation, personal care attendants, medical expenses, education, vacations, recreation, or home furnishings.

Contact the Estate Planning Attorneys of Froerer & Miles, P.P.C.

Leaving money to a loved one with disabilities may cause them to lose necessary government benefits. If you wish to leave assets to a loved one with disabilities, it is important to contact an estate planning attorney to protect your loved one's future with a special needs trusts. To schedule a consultation, please contact Froerer & Miles, P.P.C. at your earliest convenience.

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