Setting Up a Special Needs Trust

Estate planning helps families prepare for the future. It allows you to make decisions now about how your assets will be distributed after you die or become incapacitated. An estate plan can help avoid disagreements and complex probate issues. There’s a lot to think about it and it’s important to come up with a plan that meets your family’s needs.

Older couple in the park

A special needs trust may be appropriate to provide for family members who are physically or mentally ill, or those who have a chronic condition.

What is a special needs trust?

In short, a special needs trust is a legal arrangement designed to help loved ones who have a disability. The funds in the trust can be used to pay for out-of-pocket medical and dental expenses, personal care attendants, transportation, physical rehabilitation, educational expenses, home furnishings, vacations, and certain other permitted expenses.

People with disabilities often receive public assistance benefits such as Social Security, Supplemental Security Income, Medicare, or Medicaid. These benefit programs are means-tested and have very specific income and asset restrictions. One main benefit of this type of trust is that it does not put those benefits at risk.

The person who creates the trust designates a trustee who will manage and disburse the assets in it. Parents, family members, and others can contribute to the trust. Family assets, inheritances, and life insurance policy payouts can be used to fund the trust as well.

The trust ends when the beneficiary dies or all funds in the trust have been spent.

What are the benefits of a special needs trust?

There are many reasons to consider a special needs trust. The beneficiary will be supported financially while still being able to receive public assistance. The person who sets it up and third parties who fund it know that assets in the trust will only be used for the beneficiary’s needs. The assets in the trust are also protected from creditors and lawsuit judgments.

There are many factors to consider when setting up a special needs trust. These include the beneficiary’s current and future health and ability to care for themselves. It’s also important to consider how much money will be needed in the trust and how it will be funded.

Consult an experienced estate planning lawyer today

Special needs trusts are irrevocable. That means they generally can’t be changed once set up, though modifications may be possible in certain situations. The rules for setting up these trusts are strict and can be complicated. It’s also important to choose a trustee carefully, as that person will have control over assets in the fund and decide how they are used.

It’s very important to consult an experienced estate planning attorney to draft documents that are clear and meet your needs.

Attorney Yuka Hongo of Hongo Law Office, LLLC can help families set up special needs trusts as part of a comprehensive estate plan. She has lived and worked in Japan and the United States and helps U.S. residents and non-residents create plans for the distribution of their assets.

Learn more about how Attorney Hongo can help. Contact us to schedule a consultation.

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