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Is a special needs trust right for your loved one?

Estate planning can be a complicated thing, especially when you want to provide for an individual with special needs. Our country's tax laws and government assistance programs often work against each other if careful plans are not made in advance.

Leaving assets to someone with special needs can create a bit of a paradox where both the creator of a trust and the beneficiary lose. A special needs trust exists to work around just this problem and allow you to leave something to the special needs person in your life without endangering one's government assistance. In many cases, this may be a literal matter of life or death!

Why would I use a special needs trust?

Many families throughout the country run into a problem something like this: Let's say the patriarch of a family is creating an estate plan to leave portions of his estate to his three children. However, one of his children has a disability, such as a medical condition that requires ongoing care and special assistance.

If he were to just divide up his assets and give three equal portions to each child, the child with a disability may actually suffer significantly from the father's generosity. Like many individuals, this child depends on several government assistance programs to afford ongoing medical care and support. If the child were to purchase that care and help without a government subsidy, the costs would quickly eat through even a very generous gift.

If the father gives a generous gift to the child without taking proper estate planning precautions, he may inadvertently disqualify the child from crucial assistance programs. Many of these programs are only available to those whose taxable income remains below certain thresholds, so a generous gift could suddenly mean that the child can no longer receive the government assistance.

Fortunately, special needs trusts provide a legal way to give generously to a special needs person without threatening one's livelihood.

Special needs trusts create safety and quality of life

Using a special needs trust, you can leave a generous gift for the one you love without increasing his or her taxable income. Under a special needs trust, the recipient generally does not receive actual money, but rather a trustee uses the assets within the trust to purchase any number of things. This way, the beneficiary does not increase one's taxable income and can maintain eligibility for various assistance.

This might include

  • Food
  • Insurance
  • Living expenses
  • Entertainment
  • Personal assistance
  • Transportation

There are many other ways the trustee may use the assets, these are only a few.

Build the right plan for the ones you love

If you are considering a special needs trust, it is crucial to enlist the guidance of an experienced attorney who understands exactly how to craft strong documents built specifically for your needs.

With proper legal guidance, you can create a plan to provide for the ones you love without causing them unintentional harm.

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