Trusts: Special Needs Trust

Special Needs Trusts AttorneyYour estate plan should consist of a will, life insurance, proper beneficiary designations for financial accounts and insurance policies, and maybe trusts for your real and personal property. Although you can leave your property to whomever you wish, leaving assets directly to a special needs child upon your death can jeopardize their continuing receipt of their public benefits. If you have a special needs child who is receiving public benefits such as SSI or Medicaid, then you might consider establishing a special needs trust in your estate plan. If you are considering leaving assets to a special needs child, discuss it with Dan McKenzie, a special needs trust lawyer from Denver who can properly advise you regarding how to properly set one up and operate it

A special needs trust can either be revocable or irrevocable. Although beneficiaries often receive the trust assets only after the death of the grantor or settlor who established the trust, a grantor or trustee can make transfers during his or her lifetime for the benefit of the child.

To qualify as a special needs trust, the trust may not distribute assets directly to the special needs child, or allow the child to access trust funds without the express consent of the trustee. The trustee, in turn, is forbidden from distributing assets to the child if it would render the child ineligible for public benefits.

There are two kinds of special needs trusts:

  • A third party special needs trust is set up by parents or grandparents, and is part of their estate plan. A third party trust can be funded from life insurance proceeds or other separate assets.
  • A self-settled special needs trust is established with the child’s assets, such as compensation from a personal injury lawsuit.

The income or principal that gets distributed to the special needs child from the trust must not be used to pay for items that can be paid for with public benefits, such as basic medical care, food, and housing. Funds from the trust are to be spent for recreational activities such as summer camp, elective surgeries that insurance does not cover, or for travel. In other words, a special needs trust is meant to provide funds for activities that enrich the child’s life experiences or are considered luxuries.

You can create a special needs trust with a standalone trust agreement or with a provision in a living trust agreement. However they are established, special needs trust provisions must be carefully drafted to ensure that they do not inadvertently disqualify the beneficiary from receiving needed government aid. Consulting with a special needs trust attorney is a critical first step.

Consult the McKenzie Law Firm

Your estate plan should adequately and properly provide for the needs of those whom you love. Having a special needs child can be challenging, but also rewarding. Every child deserves the same opportunities to live a happy life. Talk to special needs trust lawyer Dan McKenzie about how you can accomplish this for your special child.