Including a special needs trust in an estate plan

When Quincy residents are beginning to plan for how their assets will one day be distributed among their heirs, there's a natural inclination to want to provide for those who need support the most. Those with children and grandchildren living with disabilities or special needs may include them in their estate planning by providing for a generous inheritance that will help cover their long-term care. But a direct distribution of funds may create more problems for an individual with special needs than it solves.

The reason is that many individuals with special needs or disabilities are eligible for government benefits like Medicaid, housing and food assistance, and Supplemental Security Income from the Social Security Administration. But a sudden inheritance of even a few thousand dollars can disqualify them from receiving these crucial forms of support by bumping them up over the financial eligibility threshold. They may have to "spend down" most or all of their inheritance just to qualify for benefits again.

That's not to say that family members with autism, Down syndrome or other special needs should be disinherited altogether. Government programs are generally intended to keep people from "falling through the cracks" by meeting their basic needs, but provide little beyond that. An estate plan might therefore include a special needs trust to supplement a family member's benefits and improve his or her quality of life with more comprehensive medical care or better living conditions.

A special needs trust is a relatively complex arrangement, with a third-party trustee required to make disbursements from the trust to the beneficiary. There are many regulations that must be adhered to, which is why an estate planning professional is commonly involved in the planning and establishment of a special needs trust.

Source: CBS News, ""Special needs" people need special financial planning," Ed Leefeldt, Dec. 25, 2017

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