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Review of special needs trusts

On Behalf of | Nov 6, 2019 | Trusts

Many residents of Phoenix may have one or more loved ones with special needs. Oftentimes, those with special needs must rely on government benefits and other programs in order to be able to support themselves and receive proper care. These programs frequently have income and asset caps on eligibility, as they are intended for those of limited means. This can put Arizona residents in a bind since they want to give a gift or an inheritance to their family members, but doing so could ultimately harm the recipient financially if it disqualifies that person from important benefits.

The idea behind a special needs trust is that the inheritance or gift will be placed under control of the trustee, who can only distribute it either to or on behalf of the disabled person and in specified circumstances. The fact that the trustee retains the control over the property means that, in most cases, it will not factor into a person’s eligibility for benefits. As a side bonus, the funds are also outside of the reach of the disabled person’s creditors.

Even families who have no current plans to seek out government benefits for a disabled loved one can still benefit from a special needs trust. For one, plans can easily change along with a family’s financial circumstances. Moreover, the special needs trust is still a convenient vehicle for making sure that a family can help their loved one meet medical and other expenses associated with the disability.

Properly preparing and drafting a special needs trust can be complicated. Moreover, an ineffective special needs trust can cause major issues, including the loss of government benefits. It is important to understand the right legal approach.