When you’re creating an estate plan, you need to make sure that you think about how the assets you leave behind might impact your heir’s future. For some individuals, such as those who have complex medical needs, relying on public assistance and need-based services might be necessary. Unfortunately, coming into a financial windfall might mean that they don’t meet the criteria for the programs they need, but the windfall may not be enough to support them.
One option that you might find useful in these cases is the special needs trust. This option enables you to leave behind assets for the person without the inheritance impacting their ability to continue to receive assistance from programs that are based on income or assets.
When you set up a special needs trust, you will name someone who will manage the assets. The trustee is the one who has access to the funds and must use them to pay for allowable expenses for the beneficiary. There are specific types of payments, such as food and shelter, that can’t be covered by the trust.
A special needs trust is irrevocable, so it isn’t subject to creditor claims. It also can’t be taken if a lawsuit results in a judgement against the person. There must be very specific wording added to this type of trust to ensure it is handled properly, and it must be established prior to the beneficiary turning 65 years old.
You must ensure that your estate plan meets the goals you have set for it. Working with someone familiar with setting up these plans can help you find out your options and get everything set. Remember, you’ll need to review it periodically to ensure it still reflects your wishes.