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What are the advantages of a special needs trust?

On Behalf of | Jan 21, 2021 | Special Needs Trust

When considering doing your estate planning with trusts, and not just with a will, the biggest advantage is that you have control to craft the plan you want and meet the goals you choose. For instance, an educational trust allocates money specifically for education, and an age-based trust holds the money until a young heir is old enough to use it wisely.

But what about a special needs trust? You know that it’s a tool you can use to leave assets to an heir who has special needs, of course, but why use a trust instead of just leaving them the money directly?

Maintaining current benefits

While there are numerous advantages to this tactic, the main one is that you may help the person maintain the benefits and assistance that they are already getting. After all, many of these programs base their eligibility on the income and assets that a person has. A direct inheritance could cut off these programs, whereas a trust does not count toward assets that they own, and they can keep their eligibility.

If you leave the money to the person directly, that increases their wealth. They could jump up over thresholds that mean their own benefits stop. Yes, they can now use the money that you left them instead of those benefits, but what they have to do is quickly spend their entire inheritance so that they can qualify again. This can also make the process more complicated and certain types of assistance are cut off.

Remember, unless you’re leaving them enough money to live comfortably for life, they’re going to need that assistance again. An inheritance just kicks them out of the program so that they have to apply again later, when the money is gone. Putting that inheritance in a trust allows them to stay eligible the entire time, and it also keeps the actual inheritance money in reserve in case they need it.

Setting it up

There are many steps to take if you want to set up a special needs trust, and an experienced law firm can certainly help.