A special needs trust can help those who need government benefits

by | Nov 29, 2018 | Firm News |

When a person in East Hanover is engaged in the estate planning process, they may be thinking not just about how their assets will be passed on to loved ones, but also how they will meet their financial needs as they age. Many seniors anticipate relying on Medicaid or other government benefits to pay for their long-term care needs. However, a person must have limited financial resources to qualify for such benefits.

This could present a conundrum to people who have property they want their loved ones to inherit or who anticipate receiving a substantial inheritance themselves, but also want to qualify for government benefits when the time comes. They do not want to have to impoverish themselves to qualify for benefits, leaving their loved ones with no inheritance at all. For this reason, some people choose to establish a special needs trust.

Assets that are placed in a special needs trust and are managed by a trustee are generally not counted as income when it comes to qualifying for government benefits. This is because it is the trustee who has ultimate control over these financial resources, not the beneficiary. The trustee uses trust assets to purchase necessary goods and services for the beneficiary. However, the trustee does not give money to the beneficiary outright. Doing so could disqualify the beneficiary from receiving government benefits.

A special needs trust will last until the beneficiary dies or the trust assets are expunged. Special needs trusts are a way to ensure that a person can leave an inheritance to loved ones while still qualifying for government benefits. In addition, if a person receives a lump-sum of money, and those funds are placed in a special needs trust, that person may still qualify for government benefits. However, like any other trust, special needs trusts are very complex legal documents.