At some point in our lives, we will have to take care of another person. Usually, this is a child or an aging parent. In these cases, our responsibility to them is temporary. Our children grow up to move out and take care of themselves, and our parents pass away. There are some instances where we need to take care of someone indefinitely who will never be able to take care of themselves on their own. This can be a child, a sibling, or another loved one we’ve taken responsibility for. When we have this person in our lives, there becomes the real possibility that we may pass away before they do. This means there may not be anyone or anything to take care of them, but special needs trusts can help with this.
Special needs trusts are like normal trusts in that you keep property and wealth in an account that is only available to the beneficiary after certain conditions are met. With special needs trusts, the recipient is someone who needs this wealth to take care of themselves or to pay for someone to care for them. They’re typically left to someone by their caretaker if the caretaker passes away first.
Unlike most trusts, a special needs trust has specific instructions for what the money should be used for. Other trusts can have instructions but they are rarely so in-depth and with such a specific purpose. There will likely be a new guardian appointed to the trustee who can use the trust to care for them, but not always.
If you have someone you care for who you worry will be in a bad situation if something were to happen to you, set up a special needs trust that appoints someone responsible to care for them with the resources they need.
Who can and can’t receive a special needs trust depends on the beneficiary’s ability to care for themselves, the person making the trust, and the type of trust. The beneficiary must be someone under the age of 65 who will always have special needs, will have special needs temporarily after you pass, or will develop special needs later.
For example, someone born paralyzed will always need physical assistance that you can provide. When you pass away, they will still need assistance and are eligible for a special needs trust. If they have been temporarily paralyzed, but will not recover before you pass away, they are eligible for a trust. If they are not paralyzed, nor will be when you pass away but have a disease that is taking away their ability to move, they are applicable with medical documentation as proof.
Wherewith other trusts, the person making the trust only has to have the resources to fund it, a special needs trust can only be made by the beneficiary’s parent, grandparent, guardian, or some other court for certain types. For instance, if you are taking care of a friend or partner who is not your legal spouse or ward, you cannot leave a special needs trust to them. They may be like family or your child, but they need to legally be connected to you in some way for you to make them the beneficiary.
There are three subtypes of special needs trusts, separated by where the assets for the trust come from and some specific rules they each come by.
As we have mentioned, you can seriously mismanage your loved one’s life if the trust is made wrong. You can make a will without an attorney, but this risks putting your loved one in a terrible spot after you pass. If assets are not passed down correctly, you can make your loved one ineligible for public services that will seriously help them. You might also pass your assets down in a way that allows the government to tax a large portion of it, or change the number of assets your loved one will receive.
The point of the special needs trust is to take care of your loved one while you can, so don’t put their future at risk by not consulting an attorney. The estate planning attorneys at Tressler & Associates are experienced in trusts of all kinds. We’re well equipped for making sure your loved ones will be taken care of should you pass first. Contact us soon to learn more.
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