WHY ESTATE PLANNING IS ESSENTIAL - EVEN IF YOU DON'T HAVE MASSIVE WEALTH

Does a Supplemental Needs Trust Need to be A Part of Your Estate Plan?

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There are many estate planning tools out there that can be used for specialized situations. A supplemental needs trust also known as a special needs trust is one of them. This is a specific type of trust that is used in limited circumstances. Not everyone needs one, but if you are one of the people that do, it will be extremely important for you to create one so you are prepared to protect your loved ones in the future.

At McGee Law Firm, we have extensive experience creating supplemental needs trusts. We can provide insight into whether this should be a part of your future plan and can help you to create and fund your trust so you have the right documents in place to protect and provide for the people you care about the most.

What is a Supplemental Needs Trust?

A supplemental needs trust is a specific kind of trust that you can create to provide money, property, or assets for the care of someone who is disabled. They help to protect the assets that you are designating for a disabled person to use, and they help to ensure that a disabled individual can best be provided for and have the highest quality of life possible.

Supplemental needs trusts are created by a third party on behalf of someone who is disabled, rather than being funded out of the disabled individuals own assets. When a supplemental needs trust is created, the creator or grantor decides what property and assets to move into the trust. The trust will become the owner of those assets. The creator or grantor of the trust will also designated a beneficiary, which is the person who is being helped by the assets in the trust.

There are two primary reasons to create a supplemental needs trust, rather than just providing an inheritance to or transferring assets directly to someone who is disabled.  The first is to ensure that access to means-tested government benefits is not lost. And the second is to make sure a trusted, responsible source is managing and distributing trust assets in accordance with the wishes of the trust creator.

Why is a Supplemental Needs Trust Important?

Supplemental needs trusts are important because certain kinds of government benefits are means-tested. If someone has too much income or too many financial resources, that individual will not be eligible for Supplemental Security Income (SSI). Depending on their resource level and medical condition, they may also be ineligible for government assistance with healthcare costs through Medicaid if they receive a large gift of money or property.

While Medicaid and SSI provide an important lifeline to disabled people, these benefits are often not enough to live on comfortably by themselves without any outside financial assistance. That’s where a supplemental needs trust comes in.

This special type of trust can be created to provide additional funds for a disabled individual to live on and improve and enhance their quality of life relative to what they would be able to afford if they received only Social Security disability benefits. But, because the assets will be held within the trust rather than being directly transferred to the individual with special needs, they often won’t count as resources or income that would result in a disqualification of eligibility from means-tested benefits.

You can also create a supplemental needs trust so that you can name a trustee who will manage the assets that you are providing to the disabled individual. Depending on the nature of their disability, they may be unable to responsibly manage money and property on their own. You don’t want the funds you left for them to be lost or wasted, so creating a trust in which they are the beneficiaries and a responsible party is the trustee can help you to make sure that does not happen.

With a supplemental needs trust, you are essentially creating a fund to use to pay for things beyond the basics that Social Security and Medicaid pay for, and naming someone who will manage that fund on behalf of the disabled individual. You’re setting up a system where you can keep providing for your loved ones when you are gone without interfering with their ability to get government benefits or risking them losing what you’ve worked so hard to build.

Creating a supplemental needs trust

You should consider creating a supplemental needs trust if there is someone in your life who you care about and want to provide for, who is also disabled.

It’s important you follow the proper processes for the creation of a supplemental needs trust so you don’t make mistakes that end up with your trust not serving the desired purpose and with your loved one at risk of losing the very benefits that you were trying to protect. So be sure you get the right legal help during the trust creation process so your document is enforceable.

McGee Law Firm can help. Give us a call at 817-899-3286 to learn more about the assistance that we can offer with using  this type of trust within your estate plan. 

Brandon McGee
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