Don’t Drop the Ball on Establishing a Special Needs Trust

Dec 8, 2021 | Estate Planning, Special Needs

We all know how fast time goes by during the holidays – before we know it, the ball will drop on a brand new year! On the bright side, this is a great time to resolve to do the things we’ve been meaning to do but somehow never got around to. If you have a special needs child receiving government benefits and you plan to leave them money, or anyone else in your family may leave them money, it’s essential to have a Special Needs Trust in place so the money does not pass through their hands and they do not lose their benefits eligibility status.

There are two types of Special Needs Trusts (SNTs): “First-party” and “Third-party.” The type you need depends upon whose property is funding the SNT. Let’s start with the more common Third-party SNT.

Third-party Special Needs Trusts
Third-party SNTs are commonly used by persons planning in advance for a loved one with special needs. Typically, the parents of an individual with disabilities or special needs will be the ones who establish a third-party SNT, although a grandparent, a sibling, or any other person (other than the beneficiary) may establish the SNT.

Third-party SNTs can be included in a Last Will and Testament, established within an inter vivos trust that is designed to avoid probate (“Living Trust”), or drafted as a stand-alone SNT. These SNTs are typically funded upon the death of the beneficiary’s parents or the other individual(s) who established the SNT.

A stand-alone third-party SNT allows the SNT to receive gifts from grandparents, family friends or even the person establishing the SNT, prior to the death of the SNT’s creator.

First-Party Special Needs Trusts
First-party SNTs are most often used when the person with a disability inherits money or property outright, or receives a court settlement. These SNTs also are useful when a person without a prior disability owns assets in his or her name, later becomes disabled, and thereafter needs to qualify for public benefits that have an income or asset limitation.

Individual first-party SNTs may be created (and funded) only for individuals who meet the government’s definition of “disabled” and are under sixty-five years of age when the SNT is established (and funded).

Bottom Line
Special Needs Trusts are an essential but complex planning instrument to safeguard the future financial well-being of a special needs person. The attorneys at Sussan, Greenwald & Wesler are ready to help you start the New Year off right by establishing or updating the best type of Special Needs Trust for your needs. Happy Holidays and a bright New Year to all!

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