Planning for the future of a loved one with special needs is a critical task that demands careful consideration. Many North Carolina families are unaware of the estate planning tools at their disposal, specifically Special Needs Trusts. These trusts provide an efficient way to ensure a better quality of life for your loved one while preserving their eligibility for government benefits.
What Is a Special Needs Trust?
A Special Needs Trust (SNT) is a legal instrument designed to manage assets for the benefit of a person with disabilities. This type of trust aims to supplement, rather than replace, governmental assistance programs such as Medicaid or Supplemental Security Income (SSI). The trustee manages the assets for the benefit of the disabled individual while ensuring that the assets are not counted for means-tested programs.
When Should a Special Needs Trust Be Used?
A Special Needs Trust becomes crucial in several circumstances:
Inheritance Planning
Leaving an outright inheritance can disqualify your loved one from receiving essential government benefits. A Special Needs Trust allows them to inherit assets without affecting their eligibility.
Litigation Awards
If your loved one receives a significant amount of money due to personal injury or other litigation settlements, the sum should ideally go into an SNT to protect their financial future.
Lifetime Gifts
If you or other family members wish to gift assets during your lifetime, placing them in an SNT ensures these gifts won’t jeopardize the individual’s eligibility for government programs.
How to Structure a Special Needs Trust
While the creation of an SNT can be complex, the basic components are as follows:
Choosing a Trustee
Selecting a capable trustee is critical. They will manage the trust assets and make disbursements. The trustee should be familiar with the beneficiary’s needs and also understand the rules surrounding government benefits.
Funding the Trust
You can fund an SNT with various assets such as cash, real estate, or investments. Depending on your situation, the trust can be either revocable or irrevocable.
Type of Trust
There are different types of SNTs, including first-party trusts funded with the beneficiary’s assets and third-party trusts funded with assets from someone other than the beneficiary.
Legal Formalities
Drawing up the trust document should only be done by a qualified North Carolina special needs trust attorney, as state laws can have unique provisions affecting SNTs.
Key Takeaways
If you’re looking to create a special needs trust to protect your loved one after your passing, here are the key takeaways you need:
- A Special Needs Trust preserves government benefits eligibility while enhancing the quality of life for your loved one.
- An SNT is essential for inheritance planning, litigation awards, and lifetime gifts.
- Proper structuring of an SNT is complex but necessary for its effectiveness.
Schedule a Consultation With Our North Carolina Estate Planning Team Today
Securing the future of a loved one with special needs requires diligent planning and legal expertise. At Wilson Ratledge, we are committed to offering you the best legal guidance tailored to your unique needs. Contact us today to schedule a consultation and discuss how a Special Needs Trust can be a critical part of your estate plan.