Special Needs Trusts
Too many attorneys believe that special needs planning and special needs trusts are only for young children who are currently receiving some form of financial assistance from either the State or Federal government. That is a narrow view of special needs trusts. It does a disservice to many people who need special needs planning for a loved one who does not fit into this narrow definition.
Yes, it is especially important to do special needs planning for a child receiving government assistance. Otherwise, such children may get disqualified from those benefits when they inherit money from anyone; parents, siblings, grandparents, etc. However, that is only one reason to use special needs trusts. Special needs planning and special needs trusts are not limited by age, finances, government benefits, or relationship to the person doing the planning.. Read full article Here
First Party - Special Needs Trusts
There are primarily two types of Special Needs Trusts (a/k/a Supplemental Needs Trusts). There is the First Party Special Needs Trust, and the Third Party Special Needs Trust. First Party Special Needs Trusts are specifically for special needs individuals who have assets of their own. The assets can be ether from prior jobs, inheritance, insurance from accidents, or court settlements. Only assets owned by the special needs individual can go into the First Party Special Needs Trust. Assets left in First Party Special Needs Trusts after the death of the child must go to the State of Michigan. This is to offset the benefits received by the child.
Third Party - Special Needs Trusts
A Third Party Special Needs Trust is set up for the benefit of the special needs individual. But no assets belonging to the beneficiary can go into the Third Party Trust. Only assets owned by other people (“third parties”) can be contributed to a Third Party Trust. People other than the trustmaker can contribute to a Third Party Special Needs Trust. Funds remaining in Third Party Special Needs Trusts after the beneficiary dies can be given to other family members. Remaining funds are not required to be given to the State.
Special Needs Trust Administration
Being a trustee of a Special Needs Trust is very different than being a trustee of a standard trust. With a standard trust the work for the trustee does not start until after the trustmaker dies or becomes incompetent. Many years may go by before it becomes necessary to do trust settlement. By contrast, a Special Needs Trust is used by the trustee starting from the very first day. The trustee needs to constantly make sure that all expenditures are made in accordance with the terms of the Special Needs Trust. It is used more as a reference manual and is referred to on a regular basis. We are here at Legacy Architects to help guide the successor trustees through the use of Special Needs Trusts.
Basics of Special Needs Planning and Special Needs Trusts
- Any individual who is mentally or physically unable to care for themselves needs special needs planning.
- Governmental benefits makes special needs trusts and special needs planning more critical, but it is not required for special needs planning.
- Proper special needs planning includes guardianship, long-term care, tax, and estate planning.
- First, do your personal disability and estate planning and then do your child’s special needs planning. Special needs planning and a special needs trust standing alone, without an estate plan for the parents will not work properly.
- There are two types of special needs trusts. One for the assets of the special needs child, and one for assets of all other people. The assets cannot be mixed in the same special needs trust.
- Education and planning are key to successfully transferring responsibility of a special needs child to a new guardian and caregiver. Don’t assume that your other children have the ability or desire to care for your child.
Peace of Mind
No planning is more important than planning for the long-term care of loved ones who cannot take care of themselves. More than anything else, the thing you get most with a Legacy Architects’ Special Needs Trust is Peace of Mind. We all have fears and concerns about the future, for ourselves and for our children but especially for our special needs children. Special needs planning can be a confusing process. But with Legacy Architects’ Special Needs Trusts, you will have a plan and the necessary tools to deal with what life throws at you. And once you are part of our estate planning family, we are always just a phone call away.