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12-2019 | Should You Consider A Special Needs Trust?

Should You Consider A Special Needs Trust?

Many adults have special needs and require services and assistance their entire lives. Without these benefits, they may not be able to pay for the services they need; and they may be required to spend their inheritance down before they can receive benefits again.  If you have a close family member in this position, there is a legal tool called a “special needs trust” that can help you provide for your family members with special needs so that they remain eligible for their benefits.

How Do Special Needs Trusts Work?

There are limits to how much money one can have in the bank and still qualify for SSI or Medicare. A special needs trust ensures that your loved does not receive a single lump sum payment that will jeopardize their benefits. Instead of transferring inheritance directly to a beneficiary, the money is transferred into a special needs trust. A trustee will also be designated for the trust.

The trustee will have control over the funds to manage them, as needed, on behalf of your loved one. The trustee makes purchases and spends funds for the family member, so that the beneficiary never has direct control of the money. This means that Medicare and SSI administrators will not consider these “special needs” funds when determining eligibility for benefits. The trust will end when all the funds are spent, or when the beneficiary passes away.

What Can A Trustee Pay For With A Special Needs Trust?

While the trustee cannot give any money directly to your beneficiary, they can use the money to pay for many goods or services.

For example, funds may go toward the following:

  • Personal care and home health assistance
  • Out-of-pocket medical or dental costs
  • Vacations
  • Vehicles
  • Home furnishings
  • Clothes and other belongings
  • Recreational activities
  • Education

It is important to remember that leaving money to loved ones with special needs can disrupt the benefits they rely on. This does not mean these beneficiaries have to be left without an inheritance.  An experienced estate planning attorney can help you prepare special needs trusts, or other available solutions, to make sure your family members are provided for, without affecting their SSI or Medicare eligibility. This way,  you can provide for your loved one’s well-being; and they can still receive their usual benefits. 

Matthew V. Piwowar is a Grand Rapids estate planning attorney.  Mr. Piwowar is a member of the State Bar of Michigan, and the State Bar Probate & Estate Planning Section, the National Network of Estate Planning Attorneys, and the Michigan Forum of Estate Planners.

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