If you are wondering what a special needs trust is, it is nothing more than you wanting to leave money or property to a loved one who happens to be disabled. If you do not put this money and these assets into a special needs trust, you run the risk of the individual not receiving the money or property and, even if they do receive the funds, they might no longer receive their Supplemental Security Income and Medicaid benefits. There is a good bit of information you need to know about a special needs trust. Whether you are searching for information on a special needs trust in California or in Florida, there are specific details that are involved with each. While some exact laws might change, depending on the state you reside in, the general idea of it is going to be the same. Placing your money and assets into such a trust helps secure the rights of your disabled family member.
Special Needs Trust Fund
In order to avoid losing out on Supplemental Security Income and Medicaid benefits, the special needs trust form must be completed. With this form, you leave the money and property to the trust and not to the individual. There is a bit more to the process than that though. Although all of the money and property is going to go to the listed disabled individual, some people and assistance is required to make sure this happens smoothly and in an orderly fashion, without any problems. You can read about this in more detail in this article on FindLaw.com.
It is important for you to select an individual to stand as the trustee of the fund. This is the individual who has discretion over the trust property and is generally in charge of how the money is spent on your loved one’s behalf. Even though the money goes to the person with special needs, they might not have the right mental capacity to spend the money on what is actually necessary, or even know how to spend the money at all. The trustee makes sure that, while all the money is spent on something they need, they also make sure that it is not spent in a manner that can cause the money to run out (such as someone ‘befriending’ the special needs individual in order to bamboozle the money away from them). On top of this, because the beneficiary does not have any direct control over the money and property, the Supplemental Security Income and Medicaid administrators are not able to take the money and property into consideration, so these kinds of benefits continue.
How the Money Is Spent
There are some very specific ways for how the money can be spent, and this is the same for all trusts, regardless of the State they are created in. While there are different kinds of trusts, they all basically work in the same way. You place money in the trust fund for someone, and this money can only be used by a certain individual for specific causes at a set time. With the special needs trust, the money is not given to them directly. However, the trustee is able to spend the trust assets on the recipient of the trust. Generally, the money is used for health care services, a personal attendant, furnishings, food, vacations, education, physical rehabilitation, cars or anything else that is necessary for the person. For answers on some frequently asked questions on the topic, read this page on The National Special Needs Network, Inc. website.
Why You Need a Special Needs Trust
Let’s say that you are planning your will and want to make sure all of your money and assets are available for an individual with special needs when you pass on. Now, if you simply state in your will that everything should be given to that person, they are actually going to end up losing a great deal of the money. All sorts of taxes are going to be deducted, not to mention that the money is going to prevent them from receiving their SSI and Medicaid benefits, and this greatly reduces the value of the money and/or property they are receiving. This article on CNBC.com explains the matter further.
On top of this, they might not have the mental capacity to spend the money wisely, or even understand what money is, which can cause a plethora of other problems. Instead, when you create a trust, you basically deposit the money and property into this trust. The trust is not going to receive the same kinds of taxes, so this is not something you need to worry about anymore. The money sits in the fund, almost like it does in a bank account. Only in order to access the funds, the trustee needs to approve the spending. They are like a personal, full-time bank lender. The lender determines if what the money is used for is wise and qualifies for something necessary, or if it is not in the best interest of the individual and the trust itself. While the trustee is not going to receive any money from the trust itself, they are basically in charge of it. This can be anyone from a close friend, another family member, a lawyer or anyone else who you believe can make all of the necessary decisions as to whether or not the money is used wisely.
It is actually possible to create a special needs trust by yourself, with the appropriate assistance (despite what some lawyers might tell you). The only real time that you do, for sure, need a lawyer, is if you are creating a trust for the individual with their own money. This is money they might have won from a personal injury settlement for example. If it is not your money, it makes it a bit more difficult, so the lawyer needs to come in to help navigate through some very specific state rules.
All in all, though it may seem counterintuitive, using a special needs trust for the benefit of your disabled loved ones is a much smarter choice than just leaving your money and property to them in a will. This guarantees their rights and welfare and, with a good trustee, you can put your mind at ease, knowing that your loved ones are well taken care of.