What is a special needs trust, and can it avail my family?

An immediate response to the above-posed headline question is that a so-called “special needs” trust very well could benefit your family if a loved one is either disabled or mentally ill and requires assistance in managing finances.

Many families across the United States, including in Ohio, have a family member who cannot live independently and needs financial support to ensure that basic necessities are provided for.

For many of those families, a dire concern emerges immediately, namely, a compelling fear that providing financial benefit to a loved one who urgently needs ongoing help will put select government benefits at risk.

Here’s a hypothetical that actually plays out as reality for some families. An adult child receives government help in the form of Supplemental Security Income benefits. Family members supply that person with assets via a will or other vehicle that serve to raise his or her income threshold above the allowable ceiling for collecting government assistance.

A special needs trust specially aims to prevent such an outcome. Trust proceeds are not considered income of the beneficiary, but, rather, belong to the trust, which is administered by a trustee on behalf of the beneficiary.

Given that legal distinction, a trustee can expend resources on a beneficiary -- often for things such as medical and dental care, education, therapy, clothing and so forth -- without those resources being considered income for purposes of determining eligibility for government benefits.

Special needs trusts yield numerous other advantages, as well, which can be explained by an experienced estate planning attorney.

Source: Findlaw, “Special Needs Trusts FAQ’s,” author uncited, accessed Sept. 2, 2014

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