Trying to plan for the future for a family member who has special needs can be a challenge because they may depend on receiving help from programs that have asset and income limits. If they receive a large inheritance, for example, they might be disqualified from the programs they need. This is a tragic circumstance, especially if the inheritance isn’t enough to make up for the services they’re losing.
As you create your estate plan, discuss using a special needs trust with your attorney. This type of trust is irrevocable and overseen by a trustee who isn’t the beneficiary. Because of the way it’s set up, the trust won’t count against the income and asset limits for needs-based programs.
There are some limitations on these trusts. For example, they can’t be used to pay for certain shelter or food expenses. They must include specific wording that makes the purpose of the trust clear. The proceeds of the trust can be used to cover things like caretaker pay, medical expenses and other costs.
Because this is an irrevocable trust, creditors can’t come after it, and it can’t be used to satisfy a lawsuit judgment. This helps to ensure that your loved one will continue to reap the benefits of their assets
These trusts must be established prior to the 65th birthday of the heir, so you’ll have to plan carefully if your loved one is approaching this age. Other considerations might also be present. Be sure you’re considering how this component of the estate plan works with other aspects of it. Your goal is a comprehensive estate plan that reflects your wishes.