If you have a loved one with special needs, you might worry that you will leave them in a precarious situation when you are gone. For instance, if you bequeath your estate through a traditional will, your loved one may not be eligible for government support programs such as Medicaid.
There is also the scary possibility of your loved one losing their inherited assets to third parties, some of whom may take advantage of your loved one’s trusting nature. This is where a special needs trust comes in — to plug the deficiencies of passing over your estate using a traditional will.
A special needs trust offers some legal protections
A trust is a legal arrangement that allows a third party (trustee) to hold assets on behalf of a beneficiary. The trustee acts as the gatekeeper of the trust assets and must manage them in your loved one’s best interests. Trustees owe trust beneficiaries a fiduciary duty of care, a legal obligation to administer the assets held in the trust to the best of their ability.
In addition, trust assets legally belong to the trust. Your loved one is just a beneficiary. That legal relationship is crucial as it separates trust assets from the beneficiaries. A creditor cannot come after or repossess trust assets to recover a debt owed by one of the beneficiaries to a trust.
Lastly, special needs trusts are designed not to affect the beneficiaries’ eligibility for government aid. Their structure makes this possible, and you do not have to worry that your loved one will be financially on their own.
Getting started with a special needs trust
You do not want to take chances or gamble with your loved one’s future, especially since you will not be around to save the day. A special needs trust can help you achieve this. If you are thinking of setting up one, it is best to seek legal guidance on how such trusts work and what you can do to make the most of them.