Estate planning becomes particularly critical when planning for a loved one with disabilities. A special needs trust is an invaluable tool designed to financially support individuals with disabilities without jeopardizing their eligibility for essential public benefits. The trust protects assets and significantly improves beneficiaries’ quality of life while retaining access to governmental aid.
At Unique Estate Law PLLC, we help establish well-conceived special needs trusts tailored to individual circumstances and needs. We understand the challenges of caring for a disabled loved one and are here to guide you through every step of this pivotal process. Reach out today to consult with an experienced Minneapolis estate planning attorney.
What is a Special Needs Trust?
A special needs trust (SNT) is a structured legal arrangement established to hold funds and assets for an individual with disabilities. This trust ensures the beneficiary retains eligibility for means-tested governmental benefits like Medicaid. Governmental programs often determine eligibility based on an individual’s financial assets. Receiving substantial sums through an inheritance may disqualify recipients from these essential benefits.
However, assets placed within an SNT are not direct assets of the beneficiary for purposes of governmental evaluations. This distinction is crucial. While the governmental benefits cover necessities, the trust assets cover supplementary expenses, such as specialized therapies, educational pursuits, recreational activities, and other quality-of-life enhancements.
In short, a special needs trust is an indispensable estate planning tool that provides a strategic mechanism to allocate funds for the beneficiary, ensuring they maintain access to governmental aid and additional resources to enrich their lives.
Types of Special Needs Trusts
Understanding the different types of SNTs is crucial to determining the best fit for your needs. Here are the primary types:
Third-Party Special Needs Trust
A third-party trust is the most common for families seeking to leave an inheritance or gift to a loved one with special needs. In Minnesota, such trusts are known as Supplemental Needs Trusts as it allows others to “supplement” the needs of the beneficiary of the Trust. Parents or relatives typically fund the trust using assets that never belonged to the disabled individual. One significant advantage is that upon the beneficiary’s death, any remaining funds are distributed to other family members or designated beneficiaries without repayment to the state.
First-Party Special Needs Trust
Also known as a “self-settled” trust, this is established using the assets of the person with disabilities. Such a trust may arise from a legal settlement or an inheritance. Importantly, this trust contains a “payback” provision. Upon the beneficiary’s death, any remaining funds may be used to reimburse the government for medical care or other benefits provided during the individual’s lifetime.
Pooled Trust
Managed by non-profit organizations, these trusts pool the resources of many beneficiaries while maintaining individual accounts for each. The funds are invested collectively, potentially earning higher returns. Upon the beneficiary’s death, some funds may remain with the trust to benefit other disabled individuals, while others may go toward reimbursing the state.
By working with an experienced trust and estate attorney, you can choose the right type of special needs trust, ensure optimal benefits, and minimize potential drawbacks.
How Do I Set Up A Special Needs Trust?
Establishing a special needs trust in Minnesota requires a systematic approach to ensure legal validity and the utmost protection for the beneficiary. The key steps include:
- Choose a trustee – This person or institution will manage and distribute the trust on the beneficiary’s behalf. The trustee should be trustworthy, familiar with the beneficiary’s needs, and knowledgeable about financial management.
- Consult with an estate planning attorney – Setting up an SNT requires precise legal language to ensure its validity and preserve the beneficiary’s governmental benefits. Consult a special needs attorney at Unique Estate Law.
- Draft the trust document – This legally binding document will spell out the terms of the trust, detailing how assets should be managed and disbursed. Your attorney will ensure it aligns with state laws and federal regulations.
- Fund the trust – Transfer assets into the trust once it is in place (e.g. cash, securities, real estate, or other valuable assets). Remember, how and when you fund the trust can affect the beneficiary’s benefits.
- Review and update – As with all estate planning tools, review the trust periodically. Changes in laws, family situations, or the beneficiary’s needs might necessitate modifications.
- Educate family members – Ensure that family members and potential inheritors understand the purpose and importance of the trust so that they direct any inheritances intended for the beneficiary into the trust rather than directly to the individual.
By taking these steps, you can establish a special needs trust that serves its intended purpose and ensures a brighter future for the beneficiary.
Why Choose Us?
At Unique Estate Law, we understand the unique considerations of setting up a special needs trust. When you partner with us, we will work to align the trust with your circumstances and needs. Through personalized consultations, we listen intently to understand your objectives and provide tailored solutions. Our up-to-date knowledge of local and federal regulations will ensure your trust has a solid foundation.
We believe in proactive communication and will keep you informed and empowered throughout the process. Trust Unique Estate Law to be your guiding hand, dedicated to securing a brighter future for your loved ones. Whether you’re just beginning your planning journey or need to modify an existing trust, we’re here to assist every step of the way.
Contact Our Experienced Minneapolis Special Needs Planning Attorney
Planning for a loved one with special needs may seem daunting, but it doesn’t have to be. Call Unique Estate Law today to learn how we can help.