In the past, families would disinherit family members with disabilities and special needs and leave assets to someone else who agreed to “take care” of them. If assets are left to a beneficiary with disabilities or special needs, it could disqualify them from state or federal programs under which they are receiving benefits.
In 1993 Congress enacted new laws that entitled individuals with disabilities or special needs to get the same estate planning benefits as non-disabled individuals without affecting their eligibility for state or federal benefits. The law made provision for Supplemental Needs Trusts, which enable you to leave any amount of money to a loved one who has special needs without affecting their eligibility for the state or federal benefits they receive.
The law further provides the trust proceeds must be used to provide luxuries for the individual with disabilities or special needs that he or she would not otherwise receive under the state and federal programs. Luxuries can include trips, computers, power wheel chairs, prosthetics, or other comforts not generally provided by the government.
A Supplemental Needs Trust can be created by an individual with disabilities or special needs using their own funds. This is known as a First-Party Supplemental Needs Trust. The trust can also be created by someone other than the individual with disabilities or special needs, typically a parent or relative. This is known as a Third-Party Supplemental Needs Trust.
There are different rights and restrictions to each of these trusts, but both ensure immediate qualification for federal and state benefits (i.e. Medicaid) and provide luxuries to the disabled beneficiary they otherwise, most likely, would be unable to have.
Chawla Legal Group provides clients with strategies and tools to meet their estate planning goals. Register for an upcoming workshop or call to learn more.
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For more information on supplemental needs trusts, please call (586) 273-7157 or register for a free estate planning workshop today.