Making wise financial decisions can be difficult, especially when caring for someone with special needs; but there are several government programs like Social Security, Medicare, and Medicaid to make life a little easier for caretakers. However, what can a caretaker do to financially help a special need loved one without impacting their benefits? Caretakers (or other family members or friends) can create a special needs trust on their behalf.
What Is a Special Needs Trust?
A special needs trust is a specific type of trust granted only to those with special needs or disabilities. Before we talk about the benefits of a special needs trust specifically, we must explain how trusts work.
There are three parties involved in every trust, the trustor (the one who funds the trust), the trustee (the one who manages the trust), and the beneficiary (the one who receives the funds from the trust.) Let’s examine each role in more detail!
The trustor is the one who chooses the beneficiary, determines the trustee, and funds the trust. Typically, the trustor is a family member or friend of the trustee who wants to help them succeed financially.
The trustee is the one who manages the trust at the request of the grantor (trustor.) The trustee handles the assets of the trust and gives them over to the beneficiary as written in the trust agreement.
The beneficiary is the one who receives the benefits of the trust agreement. As previously stated, the beneficiary receives the trustor’s assets that are managed by the trustee.
Now that we’ve examined the roles of everyone involved in a trust, we need to explain why people make trusts.
The general benefits of a trust include:
- Peace of mind for trustors thanks to trustees managing the funds on their behalves;
- Financial readiness for a beneficiary in the event of a trustor’s passing away;
- Potential tax savings for the trustor when endowing estates to beneficiaries.
However, special needs trusts specifically help beneficiaries in one other way: government benefit retention.
Government Benefits & Resource Limits
Those with special needs and disabilities could qualify for government benefits like Supplemental Security Income (SSI), Medicare, and Medicaid; but they must meet several requirements. One of these requirements is a resource test.
As we all know, government programs work on limited funding, so they can only award the “neediest” of people. A resource test counts assets to determine if potential beneficiaries “need” the government’s help. If a person’s asset total goes over the resource limit for a program, then he or she will not qualify for that benefit.
However, a special needs trust helps people meet the resource limit while still receiving help from family members or friends!
The Power of a Special Needs Trust
The assets in special needs trusts don’t count towards a person’s total resources. To put it another way, the money in a special needs trust does not impact the beneficiary’s ability to receive government benefits.
Therefore, a family member or friend who wants to assist a special needs person financially can use a special needs trust to help them retain their government benefits. Additionally, a trustor can use a special needs trust to pay for a beneficiary’s future medical bills, giving the disabled person the tools they need without having to deal with the financial ramifications.
Make Legacy Enhancement Your Trustee
Legacy Enhancement is a non-profit corporation established to manage special needs trusts on behalf of trustors and their beneficiaries. Our compassionate and knowledgeable managers will take care of your trust, ensuring your beneficiary receives exactly what they need as outlined in your paperwork.
Legacy Enhancement is proud to offer the same level of expert special needs trust administration found at larger banks at a fraction of the cost. Call (888) 988-5503 now for a free consultation today!