If you are the parent, or loved one, of a special needs child you are undoubtedly aware of the joy your child brings to your family. You are also likely aware of the financial costs involved in caring for your special needs child. Fortunately, there are a number of state and federal assistance programs designed to help care for special needs individuals; however, most of those programs have income based eligibility guidelines. With this in mind, special care must be taken when including your special needs child in your estate plan to ensure that well-meaning gifts don’t jeopardize eligibility for much needed assistance. Establishing a special needs trust is one way to ensure that your child will continue to receive assistance both from your estate and from the available assistance programs. A better understanding of the types of special needs trusts available may be beneficial.
A special needs trust, also referred to as a “supplemental needs trust”, operates in essentially the same way as most other trusts in that it allows you to transfer assets into the trust for the use and benefit of a third party, in this case your special needs child. When the correct language is used in the trust, however, a special needs trust also ensures that those same assets will not be counted against the beneficiary for purposes of determining eligibility for programs such as Medicaid, SSI, or public housing.
A special needs trust may be a first-party or third-party trust. A third-party special needs trust is one in which the assets used to fund the trust come from someone other than the beneficiary of the trust. Parents, grandparents, or other loved ones, for example, may directly contribute to the trust or leave gifts at death to the trust. A first-party special needs trust is one in which the assets used to fund the trust are owned by the special needs individual. The proceeds of a personal injury settlement, for example, that must legally be paid to the victim (in this case the special needs individual) can be used to fund a first-party special needs trust.
Regardless of the type of special needs trust you create, the purpose is always the same – to provide supplemental funding above and beyond what the government provides for the care and maintenance of the special needs beneficiary.
If you have additional questions or concerns about special needs planning, or your Illinois estate plan in general, contact the experienced Illinois estate planning attorneys at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.
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