Special needs trusts
Estate planning involves the arrangement, management and eventual distribution of assets over someone’s lifetime, particularly to create favorable outcomes should they become incapacitated or die. While most people in South Carolina only need to use basic legal documents like wills, advanced health care directives or powers of attorney to sufficiently prepare their estates, others benefit from considering higher-level, more complex tools like special needs trusts.
A look at trusts
People with estates, called trustors, use trusts to give a second party known as a trustee control over assets. Rather than benefiting the property owner, trusts benefit a third party called beneficiaries. Trusts have four main functions:
- Following trustors’ asset distribution wishes
- Providing legal protection for trustors’ property
- Cutting or outright eliminating the burden of estate or inheritance taxes
- Saving time and limiting the need for additional paperwork
Special needs trusts benefit those who need them most
Governments often provide support to disadvantaged populations. Although the system isn’t entirely perfect, countless social supports exist for various groups here in the U.S., including those with functional needs or disabilities. Special needs trusts allow disabled people and those who are functionally in need to garner financial support from family without affecting their Medicaid, Supplemental Security Income or other forms of government benefits.
Assume you have an adult daughter or son who receives SSI benefits, but you want to help pay for their living expenses, so you give them cash. However innocent it may seem, this warm-hearted action may end the daughter or son’s SSI eligibility and result in them getting fewer benefits. By setting up a special needs trust instead, you can support your child without reducing the dollar amount they can receive in public benefits.
Although they’re not for everyone, special needs trusts are highly valuable estate planning tools for those who need them. It may be worth learning more about your options if you’re the parent or guardian of a person with disabilities.