Should Your Estate Plan for Your Family Contain a Special Needs Trust?
While it is true that everyone should have an updated estate plan in place, this is especially true for families who have children with special needs. A child or adult with disabilities who receives money or property may find that receipt of that asset disqualifies them from their public benefit. This can have a terribly disruptive effect on the person's life. A small inheritance can cause interruption of public benefit income, health coverage, housing or some combination thereof is interrupted. Well-meaning friends and family may be the source of assets that can cause this disruption.
To avoid this result, and to maximize the benefit of property for an individual receiving public benefits, parents should consider creating two special needs trusts for their child with a disability:
- First Party Special Needs Trust: The first type of special needs trust, referred to as a 1st Party Special Needs Trust, holds and administers assets owned by the child. These assets might include lawsuit settlements and/or accumulated gifts in the child's name, such as savings bonds or bank accounts.
- Third Party Special Needs Trust: The second type of special needs trust, referred to as a 3rd party Special Needs Trust (SNT) is established to hold assets contributed by others, such as life insurance proceeds naming the SNT beneficiary, inheritances left to the SNT (not the child), or gifts from those who wish to contribute assets to benefit the child without disqualifying them from benefits. This second type of trust is frequently funded by a life insurance policy owned by the trust. Parents should also draft a letter with information about their child to help the Trustee better understand and provide for their child.
Resources available in both a 1st Party and a 3rd Party SNTs to supplement public benefits, enable parents to plan, direct, implement and finance ways to improve and maintain their child's quality of life. Where the rules regarding public benefits eligibility are strictly enforced, our Braintree, Massachusetts, law firm is available to also assist clients with questions regarding the funding and the administration of these special needs trusts.
Contact a Braintree Special Needs Trust Attorney
If you have questions about whether this type of planning is appropriate for your family, please call the Gemma Law Office or contact our law firm online to schedule a free consultation to discuss your questions and concerns with an experienced Braintree special needs trust lawyer.
