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What is a Special Needs Trust?
If you have a minor or adult child with special needs – or another family member with special needs – what will happen when you can no longer act as the parent or caretaker? An Arizona trust attorney can help you prepare a special needs trust that alleviates your concerns.
A special needs trust – a trust for a mentally or physically disabled loved one – ensures that your loved one will be appropriately cared for after you pass away or if you become incapacitated. You can prepare a special needs trust with the assistance of an Arizona estate planning lawyer.
How Will a Special Needs Trust Benefit Your Loved One?
What is a trust? A trust is a legal document that empowers one person (a trustee) to manage assets for another person (a beneficiary). A special needs trust provides for disabled persons without disqualifying them from programs like:
- Medicaid
- Supplemental Nutrition Assistance Program (SNAP)
- Supplemental Security Income (SSI)
These and other state and federal programs offer financial assistance to individuals with mental or physical disabilities, but these programs usually limit eligibility. If the disabled individual’s assets exceed the eligibility limit, that person cannot qualify for benefits.
If you give or leave assets directly to a special needs loved one, you may unintentionally disqualify that loved one from eligibility for public benefits, but if you move the assets into a special needs trust, your loved one can be cared for properly and retain eligibility for benefits.
What is the Role of a Trustee?
When you set up a special needs trust, you will designate a trustee to manage it. Choose someone knowledgeable about finances, trustworthy, and skilled at handling details. Many families name an attorney or a professional trustee.
A trustee manages the trust assets and uses those assets for the beneficiary’s benefit. While you are alive, you may name yourself as the trustee and manage the trust yourself, but you must also select a successor trustee who will oversee the trust after your death.
A trustee invests the trust’s assets, distributes them as needed to the beneficiary, and files the tax returns. A trustee ensures that a special needs trust fulfills its purpose and spends the funds only for the special needs individual’s housing, food, clothing, and medical needs.
Are There Different Types of Special Needs Trusts?
Federal and state law set forth the legal requirements for special needs trusts. Under Arizona law, there are three types of special needs trusts: first-party trusts, third-party trusts, and pooled trusts:
- First-party special needs trusts are trusts that special needs individuals fund with their own assets.
- Third-party special needs trusts are funded by a party other than the special needs individual, usually a parent or another family member.
- A pooled special needs trust combines with the assets of at least one other special needs trust for more profitable investing.
How Will Your Attorney Prepare a Special Needs Trust?
When you and your Arizona trust attorney establish a special needs trust, it must comply with federal and state trust regulations and rules:
- Your attorney must use precise language and indicate clearly that the trust’s purpose is the “supplemental and extra care” of your disabled loved one.
- The trust should not provide funds directly to your disabled loved one. The trustee will pay for the beneficiary’s medical, housing, food, and utility expenses from the trust assets when other benefits do not pay those costs.
- A special needs trust is irrevocable, so you cannot revise or cancel it without court approval. Creditors cannot seize trust funds, the funds are not subject to liens, and your loved one cannot lose them through a lawsuit.
Should Your Loved One’s Special Needs Trust Be Pooled?
Many nonprofit organizations administer pooled special needs trusts. These nonprofits pool assets from several trusts to create a more substantial investment pool. They combine your loved one’s assets with others’ assets for investment and management purposes.
The nonprofit establishes separate accounts for each beneficiary, tracks their shares, and ensures the funds are used to meet their needs. Pooled trusts are ideal when you want the security of a trust managed by experienced investment professionals.
Is a pooled trust right for you and your loved one? Planning for a special needs loved one is about finding the best solutions for that person. Take some time to explore your options, seek the advice and insights of an Arizona trust lawyer, and make an informed decision on that basis.
What Else Should Family Members Know?
For many Arizona families, a special needs trust for a loved one is only one part of a comprehensive estate plan. Such a plan may include other trusts, a last will, a financial power of attorney, and a living will or healthcare power of attorney.
You need personalized advice when establishing a special needs trust or setting up a comprehensive estate plan. An Arizona estate planning lawyer can ensure that you have considered your options carefully and that your special needs trust overlooks nothing and is easy to understand.
Thoughtful estate planning can benefit almost every family. A practical, comprehensive estate plan will ensure that your family has financial security after your death or if you become incapacitated.
Who Should Prepare Your Special Needs Trust?
We cannot know the future, but good planning can prepare us for it. An estate planning attorney at AVID Esq. Group will answer your estate planning questions and help you set up a special needs trust that complies with all state and federal laws and regulations.
At AVID Esq. Group, we help you explore your planning options and help you protect your family’s long-term best interests. From our offices in Gilbert, we serve families in the greater Phoenix area and across the state.
To learn more about special needs trusts – or any other aspect of estate planning – call AVID Esq. Group at 480-467-5636. Our estate planning team offers your first consultation without cost or obligation. AVID Esq. Group will ensure that your family is ready for the future.
