What is a special needs trust and is it right for you?

What is a special needs trust and is it right for you?

On Behalf of | Aug 17, 2022 | Estate Administration, Estate Planning |

Figuring out how to ensure that your loved one’s needs are met when you’re gone can be daunting. This is especially true if your loved one has extensive medical or mental health needs that render it challenging for them to take care of themselves.

While leaving them assets through a standard will may be helpful to a certain extent, your loved one’s treatment and care can easily eat through the bulk of that inheritance in a short period of time.

What can you do to protect your loved one?

 One of the best options that may be at your disposal in this kind of situation is the special needs trust. This estate-planning vehicle allows you to place assets in a trust for the benefit of your loved one without affecting their ability to qualify for Medicaid.

This is because assets that are disbursed from the trust are not counted for the purposes of income calculation when determining Medicaid eligibility. This is a big advantage given that Medicaid can cover most, if not all, of your loved one’s medical treatment.

How can trust assets be used?

 Although a special needs trust can be extremely beneficial, many are worried about the limitations on the use of trust assets. While there are some restrictions on how these trust assets can be utilized by your loved one without them affecting Medicaid eligibility, the list of acceptable uses is pretty broad. In fact, your loved one can use the special needs trust assets to pay for any of the following:

  • A primary residence
  • Furniture
  • Personal effects
  • A vehicle
  • Medical costs not covered by Medicaid
  • Equipment like a wheelchair
  • Rehabilitation care
  • Education
  • Training
  • Appliances
  • A computer
  • Certain forms of leisure and recreation
  • Travel expenses
  • Vacation

So, as you can see, there’s a lot of ways that your loved one can enjoy the assets placed in a special needs trust without affecting their ability to obtain needed medical care. In other words, sound planning can really give your loved one the life that you intended to help create for them.

What a special needs trust can’t cover

 There are some things that a special needs trust can’t pay for, though. Those restrictions include:

  • Cash payments made directly to the beneficiary
  • Groceries
  • Meals ordered at restaurants
  • Utilities
  • Property taxes

Since there are some restrictions on how these trust assets can be used, you’re best off discussing the particulars of your situation with an attorney. That way, you can rest assured that you’re creating the special needs trust in a legally valid way and in a way that best supports your loved one.

Creating the custom-tailored estate plan that is best for you and your family

Remember, the estate planning process is entirely customizable, which means that you can create your estate plan in whatever way you see fit. However, most estate plans fall short simply because those who engage in the process don’t know or don’t fully understand their options.

Don’t let this negatively impact your loved ones’ future. Instead, be diligent in educating yourself as to your options and the implications that they may have on your estate and your loved ones. To learn more about the various estate planning vehicles that you might have at your disposal, consider reaching out to a law firm that practices in this area and has a track record of providing sound legal advice.