What Are the Benefits of a Special Needs Trust?

 Posted on June 27, 2019 in Estate Planning

By Attorney Denis Regan

All parents hope that their children will be safe and happy throughout their lifetime. This concern can be a serious stressor for parents of special needs children. While some individuals with special needs can live a fully functioning life, many struggle to do everyday things without the help of another adult. Parents may fear that their child will not have a form of income to sustain themselves, and they may want to take steps to ensure that their child is provided for. 

One of the best ways to create peace of mind is by forming a special needs trust. This type of trust holds and protects financial assets for the benefit of a disabled beneficiary. Many of these trusts receive assets from a legal settlement that involves the special needs child, while others are created through an estate plan. This allows parents to provide the child with assets that can be used during or after the parents’ lifetime, as well as life insurance proceeds after their death.

Benefits of a Special Needs Trust

1. Maintaining Government Aid: Many special needs individuals receive government benefits to help cover the costs of living. If a family member gives money or assets to the child or names them as a beneficiary in their will, this can affect their eligibility for public aid. A gift of assets that exceeds $2,000 can cause the individual to lose assistance such as Medicaid and Supplemental Security Income. By placing these assets in a trust, parents can avoid jeopardizing their child’s eligibility for government aid.
2. Taxes: All funds distributed to a beneficiary of a special needs trust are tax-deductible. This means that the disabled person will actually receive more money or assets due to the lack of taxation on the funds. This is a good way to ensure that your family member receives funds that would have otherwise been put into the hands of the government.
3. Asset Usage: Formulating a special needs trust ensures that the assets within the trust are used for the care of the person with the disability. The legal documentation eliminates any possibility that the individual can be taken advantage of, since the trust lays out exactly what the money should be used for.

Our Milwaukee Wills and Trusts Attorney Can Help

Ensuring that children are provided for is one of the biggest concerns that parents have, and those with disabled children may be particularly worried about their children’s needs. Setting aside assets through a special needs trust is one of the best ways to prepare for your child’s future and ensure that they will have the resources they need. At Gimbel, Reilly, Guerin & Brown, LLP we work with parents that are looking to secure their child’s future. If you would like to discuss whether a special needs trust is right for you, contact our Milwaukee, WI estate planning attorneys at 414-271-1440 to set up a consultation.

Sources:

https://www.friendshipcircle.org/blog/2012/09/06/the-pros-and-cons-of-a-special-needs-trust-ensuring-your-childs-future/

https://www.herwealth.com/blog/5-reasons-consider-special-needs-trust