What language should be included in a special needs trust?

by | Aug 25, 2017 | Firm News |

Many people in East Hanover with special needs, such as a disability or a mental illness, rely on government benefits to make ends meet financially. However, these benefits are often needs-based. If an individual has too many assets in their name, they might not qualify for benefits. This is when it can be important to have a special needs trust.

A special needs trust can be drafted in a way that the beneficiary of the trust does not lose the necessary government benefits. This is because a trustee is established to manage the assets of the beneficiary. Because it is the trustee, not the beneficiary, who has complete control over the beneficiary’s finances, these assets will not be counted when determining whether the beneficiary qualifies for government benefits. In this manner, the beneficiary may be able to receive government benefits while also having access to their funds, since the funds are the property of the trust.

Special needs trusts must be worded very carefully in order to be legally sound. Therefore, it is important that someone who is considering executing a special needs trust consult with an attorney, who can ensure the trust is legally enforceable. While this post cannot serve as the basis for the execution of a special needs trust, in general, there are some provisions that should be included in a special needs trust.

A special needs trust should include wording stating that it is meant to provide “supplemental and extra care” other than that which the beneficiary may receive in government benefits. It should also include provisions stating that the special needs trust is not meant to be a basic support trust. An estate tax provision known as the “Crummey Clause” should not be part of a special needs trust. Usually, it must include provisions addressing payback to Medicaid. It should also explain that it is meant to be an exception to the Omnibus Budget and Reconciliation Act. Finally, if there are any parts of the United States Code that apply to the trust, these should be included.

As this shows, a special needs trust can become very complicated, very quickly. To avoid drafting a trust that doesn’t pass legal muster, it may help to enlist the aid of an attorney, so the trust can be legally enforceable from the get-go.

Source: FindLaw, “Special Needs Trusts FAQ’s,” accessed Aug. 20, 2017