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Friday, September 7, 2018

How Do You Fund a Special Needs Trust?

A Special Needs Trust refers to an estate planning tool that allows you to provide for a loved one who has special needs. With a Special Needs Trust, you can protect assets so that the person can qualify for important government benefits, such as SSI and Medicaid. However, a Special Needs Trust should be carefully structured with the assistance of a Texas special needs trusts lawyer. If the trust is not structured and funded correctly, the person could be denied government benefits.

Funding a First Party Special Needs Trust

The assets in a First Party Special Needs Trust belong to the person with special needs. The trust assets are used to supplement the benefits received from needs-based government benefits, such as SSI and Medicaid. The assets in the trust must be used to pay for living expenses and needs that government benefits do not cover. If any funds remain in the First Person Special Needs Trust, those funds must be used to pay back Medicaid for benefits paid by Medicaid for the person with special needs.

Funding a Third Party Special Needs Trust

A Third Party Special Needs Trust can be created for a person with special needs by anyone. This type of special needs trust is used by many people in their estate plan to protect the inheritance of a person with special needs. Instead of leaving the property directly to the person, the property is transferred into a trust naming the person with special needs as the beneficiary. The property must never pass directly to the beneficiary. In other words, the trustee has sole control over the trust assets and distributions.

One very important difference between a First Party and Third Party Special Needs Trust is what happens to the remaining property in the trust when the person passes away. Because the property was never transferred directly to the beneficiary, the assets in the trust do not need to be used to repay Medicaid.  The trust agreement should contain a clause directly the trustee to disburse the assets in the trust to a secondary beneficiary or charitable organization.

Why Do I Need a Special Needs Trust for My Loved One?

If you have a beneficiary with special needs, you need a Special Needs Trust as part of your estate plan to ensure that your loved one has the funds he or she needs in addition to government benefits. Leaving property directly to your loved one can terminate government benefits, leaving your loved one without sufficient funds to pay for living expenses and needs.

A Special Needs Trust can pay for many of the things that government benefits do not cover. For instance, the trustee may use the trust funds to pay for computers, furniture, and hobby materials. The funds may be used to pay for vacations and recreational activities to enhance your loved one’s life. If your loved one needs supplemental tutoring or education, the trustee could use the trust funds to pay for these expenses.

Work With A Texas Special Needs Lawyer

It is very important that a Special Needs Trust is drafted and funded very carefully. If the trust does not contain specific legal language, the trust could interfere with needs-based government benefits.

If you need assistance, contact the Law Office of Carey Thompson today to discuss your goals with a Texas special needs planning lawyer. We can help you ensure that you have the estate planning documents necessary to protect your loved one after your death.

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