This estate planning tool can provide for people with disabilities without jeopardizing their government benefits.
Families must decide whether to hire a company to manage the trust or have a family member act as co-trustee or guardian.
There is one aspect of estate planning that not everyone has to do but is very important to those who need it: planning for the future of a child with disabilities. This could include a child who was born with a mental or physical disability or one who became disabled later in life and needs someone to oversee his or her affairs.
The vehicle many families choose is a special needs trust, sometimes called a supplemental needs trust. The rules of special needs trusts are complex, and it's best to have one drawn up by a lawyer who specializes in that area. Another factor to take into account is that the challenges individuals with disabilities face can vary. That makes drawing up exactly the right trust, as well as other legal documents that may be needed, a complicated task. Money from a special needs trust must legally benefit the person with disabilities, not the family.

The trust can be established while the parents are still alive or be part of a will that calls for the trust's creation when they die. A bequest of more than $2,000 could make the child ineligible for federal programs until all the money is spent. For example, a special needs trust can't pay for food and shelter, but it can pay for clothing, computers, education, aides and equipment such as wheelchairs, hearing aids and braces.
Someone who requires round-the-clock custodial care will have very different needs from an adult with developmental disabilities who can cook for herself or a person with physical disabilities who has a career and can manage her own financial affairs. Plus, the money needs to be managed to last throughout the life of the person with disabilities. That means, for example, if the beneficiary pays for a new home from the trust that the entire family will live in, the rest of the family is required to contribute to the cost.
If so, arrangements must be made to provide for the child's needs without jeopardizing those benefits, usually through a trust. A large settlement from a malpractice suit or an accident needs to be managed in such a way that the beneficiary gets what he needs, the money lasts and the beneficiary can collect government aid, if needed. Managing a special needs trust is complex and best done by companies that specialize in that job.

The purpose of a special needs trust is to provide for a person with disabilities without jeopardizing government benefits such as Supplemental Security Income payments, Medicaid or food stamps.
While the loss of $733, the maximum monthly SSI disability payment, may not be significant, losing Medicaid health benefits could be huge for someone with complex medical problems. The trust will need to meet both federal and state standards, and decisions may be subject to court approval. Some companies work only with large amounts of money, $250,000 or more, while others will handle smaller amounts such as $25,000. Another option is a pooled trust run by a nonprofit, which manages money for many people with disabilities and may keep the balance of the money when the beneficiary dies. They can make it so much more specialized," Suzuki says, including designating heirs when the beneficiary dies.

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