If your child or family member has physical or mental disabilities, a special needs trust can be an important estate planning tool. Without incorporating a special needs trust into your state plan, your loved one with special needs could risk losing important public benefits, including SSI and Medicaid benefits. A special needs trust allows you to protect your assets, protect your loved one’s eligibility for benefits, and ensure they are taken care of after you pass away.
South Carolina has strict laws related to special needs trusts, and it’s crucial that the trust follows the distribution rules and that you carefully choose a trustee. The attorneys at Willcox, Buyck & Williams, PA are here to help you every step of the way. Contact Willcox, Buyck & Williams, PA to schedule an initial consultation and learn more about how we can help you create a special needs trust to protect your loved one and help him or her thrive after you are no longer here.
What Is a special needs trust?
A special needs trust, also known as a supplemental needs trust, helps protect the assets you leave behind for a child or other loved one with special needs. A special needs trust allows your child to inherit money from you without losing essential benefits like health insurance and Social Security income. The purpose of special needs stress is to provide supplemental income for an individual with special needs. The assets in the trust can be used for your loved one’s medical care, pet care, travel, entertainment, and other quality-of-life services.
The Benefits of a special needs trust
Multiple benefits come from creating a special needs trust. A special needs trust provides your loved one with supplemental income and preserves his or her public benefits. To qualify for certain public benefits like Medicaid, your loved one must have an extremely low income and limited assets.
Suppose your loved one inherits money from your will or receives money as the beneficiary of a trust. In that case, it will put his or her income level above the eligibility requirement. As a result, your loved one could lose Medicaid benefits and not have adequate health insurance coverage. When a special needs trust is set up correctly, the assets transferred into the trust will not count against your loved one regarding eligibility for public benefits.
Financial Protection and Control of Assets
Assets transferred into the trust are protected from creditors, including credit card companies, landlords, and other lenders. Transferring assets into trust ownership gives parents assurance that the funds will be protected for the benefit of their child or loved one with a special need. As the trust creator, you have the right to designate one or more trustees who will manage the trust’s assets to benefit your child or loved one. Many parents appoint a professional advisor or an experienced family member to the position of trustee. as the person who established the trust.
As the creator of the trust, you have a right to determine exactly how the fun should be used during your child’s lifetime and after your child passes away. Finally, when you create a special needs trust, you can help your loved one avoid the probate process. You can set up the trust to allow your child to draw supplemental income immediately after you pass away without waiting for the probate process to be completed, which can take months.
First-Party Trusts, Also Called Self-Settled Trusts
There are several different types of special needs trust, making it important to work with an experienced attorney when deciding your strategy for creating a special needs trust. A first-party special needs trust, also called a self-settled trust, holds assets that belong to the beneficiary.
If a person with a disability receives a lump sum of money through a court settlement or inheritance, creating a first-party special needs trust can be advantageous. A first-party trust can also be used when the disabled individual is older and becomes disabled after having accumulated assets. Creating a first-party trust can help him or her qualify for public benefits with an asset or income limitation.
The assets transferred into a special needs trust are provided by people other than the individual with special needs. The parent, grandparent, friends, or other family members of the individual with special needs can transfer assets into the trust without a payback provision. These types of trusts are usually implemented as part of the donor’s estate plan while the donor is still living. Third-party trusts can be standalone or included in a parent’s last will and testament.
Generally, special third-party needs trusts are funded when the beneficiary’s parent who established the trust passes away. Additionally, parents can make a third-party special needs trust the beneficiary of their life insurance policy. These types of trusts can also own real estate Investments or receive benefits from retirement accounts.
Pooled trusts are created and administered by a nonprofit association to benefit multiple individuals with disabilities. As the name implies, the trust administrator pools the assets of multiple individual accounts for investment and management. These types of trusts are beneficial when individuals with special needs have modest assets or no living family member or parent. However, pool trusts require a government benefits payback provision for the balance of the funds remaining in a person’s account after he or she passes away.
Contact a South Carolina Special Needs Trust Attorney Today
If you have a child or loved one with physical or mental disabilities, creating a special needs trust can help you provide for him or her after you are gone. The attorneys at Willcox, Buyck & Williams, PA are prepared to help you decide which type of trust works best for you. Contact Willcox, Buyck & Williams, PA, to schedule a free case evaluation with an experienced South Carolina estate planning attorney.