“Protecting your family is every person’s basic instinct, it is why we would do everything to make sure the ones we love stay safe and out of harm’s way.”

— Unknown

When someone you love struggles with a disability, they may rely on certain needs-based government benefits to gain access to the services they need. Benefits such as Supplemental Security Income (SSI) and Medicaid are critical for those with disabilities, and yet – should something happen to you – their access to those services could be jeopardized. For example, if you pass away and leave a sum of money to a disabled loved one, it could disqualify them from receiving the services they rely on. This is where special needs trusts come into play:

Preserve Access to Government Benefits

A mentally or physically disabled loved one will remain qualified for government benefits, regardless of the value of the trust.

Protect Your Hard-Earned Assets

A special needs trust adds a layer of protection against the government attempting to access funds from inheritances, etc.

When it comes to Special Needs Trusts, it’s important for your Trustee to understand what they can and cannot do. Remember, a Special Needs Trusts is irrevocable by design. These trusts can hold assets, property, and money, which your Trustee can use for the benefit of the beneficiary, though certain rules apply:

Money from a Special Needs Trust cannot go directly to the beneficiary; it must be paid directly to a service provider or vendor.

The funds from a Special Needs Trust may not be used for household repairs, food, or monthly bills.

Rent, mortgage, property taxes, or HOA fees may not be paid for by the trust.

How Does a Special Needs Trust Work?

The Hailey-Petty Law Firm can guide you through the process of setting up a Special Needs Trust (SNT). Like with traditional trusts, you will name a Trustee to manage the trust’s assets, as well as a Successor Trustee who will manage the trust’s assets in the event your Trustee becomes incapacitated or dies. Your disabled loved one would be named as the beneficiary of the SNT. Once the SNT is formed, you would fund it with cash, property, investments, retirement plan benefits, proceeds from a legal settlement, or a life insurance policy.

A Special Needs Trust can be used to provide the following services to the named beneficiary:

  • Caregiving, personal attendant, or therapy
  • Travel, concerts, or other experiences
  • Utilities, internet, computer, phone, etc.
  • Education
  • Pet care

An experienced estate planning attorney can help you establish the right type of Special Needs Trust for your loved one. Every situation is unique, so it’s important to work with a qualified attorney who can ensure your plan is failproof.

Can You Dissolve a Special Needs Trust?

An SNT is irrevocable, so you may not dissolve it. There are very few provisions for making amendments to this type of trust.

Are Special Needs Trusts Taxed?

The way that SNTs are taxed is complicated. To put it in the simplest terms, an SNT is taxed as a “pass-through entity.” The trust would file a tax return to report any income earned. Otherwise, different types of SNTs have different taxation rules, which your attorney will be able to explain in greater detail.

Who Qualifies for a Special Needs Trust?

Depending on which type of SNT you choose to draft, there may be age requirements. For example, First-Party SNTs can only be drafted for disabled beneficiaries under the age of 65. A Third-Party SNT, however, can be set up for a beneficiary of any age. Pooled SNTs do not have any age requirements, but some states impose penalties if beneficiaries are over age 65.

Contact the Hailey-Petty Law Firm

The attorneys at Hailey-Petty Law can help you understand your options when it comes to protecting the government benefits that your disabled loved one depends on. Complete the brief form below to request a free 30-minute consultation with an estate planning attorney in Austin or San Antonio, TX!