You hear a lot of different terms tossed about in estate planning and questions naturally arise. We want to take a look at some of estate planning devices so we can provide readers with an ever-broadening estate planning vocabulary. With this in mind we would like to take a look at special needs trusts.
If you want to plan your estate effectively you should look for an estate planning attorney who will provide you personalized attention. Different families have different objectives based on the dynamics of their families. There is no one-size-fits-all estate plan.
You may have a person with a disability who is on your inheritance list. When planning your estate you need to take pause before you simply leave this person a direct inheritance.
A high percentage of people who have special needs are enrolled in government programs such as Medicaid and Supplemental Security Income. These programs are only available to people who can demonstrate a significant level of financial need. In fact, the upper asset limit for Medicaid eligibility is just $2000.
If you name as a beneficiary in your will a person with a disability and leave this individual a slice of the pie, your act of generosity could actually backfire. The value of the inheritance could be dwarfed by the value of the government benefits the heir is receiving and relying on to meet expenses. A lifetime of care for some individuals with special-needs can cost well over $1 million.
An inheritance could cost a person with special needs to lose his or her benefit eligibility. We need to raise a caution here. There are websites on the Internet that sell generic legal documents, such as a last will. If you buy into these offers you could make certain uninformed and wrong decisions. Such a decision could lead to disastrous consequences for family members you leave behind. This especially applies to someone who uses a last will to leave a bequest to someone with special-needs. Any influx of money could render the person with a disability ineligible for much-needed government benefits.
The proper way to provide for someone with special-needs is to make the individual the beneficiary of a special needs trust. These trusts are sometimes called supplemental needs trusts. Special needs trusts are carefully constructed with government benefit eligibility in mind. The trustee you choose can make financial resources available that improve the quality of life of the beneficiary without disqualifying him or her for benefits to which he or she is otherwise entitled.
The nature of these distributions, and the purposes that the distributions are used for, are carefully measured. As a result, the beneficiary enjoys a better standard of living but retains eligibility for government benefits.
- Why Do You Need a Lawyer to Plan Your Estate? - September 15, 2022
- Lessons Learned From the Estate of Zappos Multimillionaire Tony Hsieh - September 13, 2022
- Are You Aware of the VA Aid and Attendance Pension? - September 8, 2022