Many people care about what happens to their property and assets after death, but interestingly, a trust may be what affects them the most during their lifetime. Trusts play a crucial role in estate planning by providing numerous benefits and flexibility that can help individuals effectively manage their assets and distribute them according to their wishes. Many haven’t heard of a special needs trust, but learning about what it does may save you and your family from difficulty in the event of a tragedy.
What is a Special Needs Trust?
A special needs trust (SNT) is an important legal tool for making sure your loved one’s health care and living needs are taken care of in the event that you predecease them or are prevented from financially supporting them for some other reason. That reason may include mental incapability or the trustee becoming a disabled person. An additional, and very important, benefit of a Michigan special needs trust is that the funds placed in that trust will not disqualify the recipient from receiving government benefits.
So, in other words, giving more consideration to the beneficiary of the trust in case of an unexpected situation. These unexpected issues may cause the trustee to want to arranging the trust assets differently.
Collens Estate Law, is a leading estate planning law firm that is ready to set up and administer the right kind of trust to take care of your family member’s special needs. Attorney Howard H. Collens has many years of experience handling all trust-related matters throughout Royal Oak and Michigan, including:
- Establishing special needs trusts for families
- Serving as SNT trustee
- Court-appointed trusteeship
- Conservatorship
- Guardianship
Call us at 248-545-2500 to learn how we can help you. We serve clients throughout the Detroit metro area.
Benefits of Special Needs Trusts
When it comes to safeguarding the future of a loved one with special needs, a Special Needs Trust (SNT) can be a lifesaver. They offer a multitude of benefits that can provide a more secure and comfortable life for your loved one.
Protecting Eligibility for Public Benefits
The beauty of a Special Needs Trust is that it allows the beneficiary to retain their access to vital public benefits such as Medicaid and Supplemental Security Income (SSI). Without an SNT, receiving an inheritance or other financial windfalls could disqualify your loved one from these programs. But with an SNT, the assets are held in the trust, and don’t count toward their personal assets.
Providing for Supplemental Needs
Here’s where it gets personal. An SNT isn’t just about keeping benefits safe. It’s about enhancing the quality of life for your loved one with special needs. The trust can pay for expenses not covered by public benefits, such as specialized equipment, home modifications, or even trips to see family. It provides the financial freedom to explore and enjoy life outside of what’s covered by government programs.
Avoiding Probate Court
No one wants their loved one’s future to get bogged down in legal wrangling. Setting up an SNT ensures that the assets in the trust are exempt from probate, the legal process of distributing a deceased person’s assets. This not only speeds up the process of providing support to your loved one, but it also ensures their financial matters stay private and away from court scrutiny.
Guidance for Trustees
In addition, we also provide experienced legal advice to individuals assigned as trustees for special needs trusts. If you are the trustee of a special needs trust, you have a fiduciary responsibility to ensure that you comply with the terms of the trust. We will explain the relationship between you, the family and the beneficiary, and will help ensure your rights are protected in the event of a challenge from a family member.
Creating the trust can provide many types of financial support, including:
- Medical and dental care
- Therapy expenses
- Education expenses
- Utility costs
- Transportation expenses
- Many others
Will A Special Needs Trust Disqualify the Beneficiary for Government Assistance?
Finding the right way to provide for the needs of an adult, child or grandchild with special needs is a challenge for anyone engaging in estate planning or establishing a family trust.
How do you take care of a person who has the additional expenses associated with a special mental or physical need, without affecting the beneficiary’s qualifications for government or public benefits, such as Social Security/ SSI and Medicaid?
An irrevocable stand-alone SNT provides for the beneficiary, without disqualifying him or her from government assistance.
Types of Trusts for Special Needs
First-party and third-party special needs trusts are two types of trusts commonly used in estate planning for individuals with disabilities or special needs.
First Party Special Needs Trust
The first-party special needs trust is also called the self-settled special needs trust. It is created with the assets owned by the individual with special needs, such as inheritance. It protects these assets but still allows the individual to qualify for things like Medicaid or Supplemental Security Income. This is useful when an individual receives an unexpected windfall and wants to maintain eligibility for government benefits.
Third Party Special Needs Trust
A third-party special needs trust is established by someone other than the person with special needs, typically a parent, grandparent, guardian, or court. Unlike first-party special needs trusts, there is usually no requirement to pay back Medicaid upon the beneficiary’s death. Instead, any remaining funds can be distributed to other beneficiaries or charitable organizations.
Both first-party and third-party special needs trusts are subject to specific rules and regulations, which vary by jurisdiction. It’s important to work with an experienced attorney specializing in special needs planning to ensure compliance with applicable laws and to tailor the trust to meet the unique needs and goals of the individual and their family.
Setting Up a Special Needs Trust in Michigan
Setting up a Special Needs Trust in Michigan can be a bit involved, but it’s a worthwhile endeavor. With a bit of careful planning, you can tailor it to your loved one’s unique situation.
Gather Information
Begin by jotting down your loved one’s financial situation and specific needs. It’s like putting together a puzzle, so make sure you have all the pieces.
Choose the Type of Trust
Next, decide between a third-party trust (set up by others) or a first-party trust (set up with the beneficiary’s assets). It’s not a one-size-fits-all decision, so consider what fits best for your situation.
Finding a Trustee
The trustee role is a big deal; they’re the ones managing the trust. Find someone reliable, good with finances, and genuinely caring for your loved one. Whether it’s a family member, friend, or professional, choose wisely.
Hiring an Attorney
You’ll want an experienced estate planning attorney to help with this. Special Needs Trusts can get complicated, and Michigan has its own rules. An attorney can guide you through the setup process and make sure it’s customized to your loved one’s needs.
And there you have it. By following these steps, you can set up a Special Needs Trust in Michigan that’s just right for your loved one.
Huntington Woods Trust and Wills Attorneys
Contact our estate planning attorneys to arrange a consultation with attorney Howard H. Collens to discuss your specific circumstances. You may have many additional questions regarding special needs trusts, including how your life insurance may come into play, or how you can start the process of establishing one.
Our firm is ready to handle all aspects of establishing and administering a special needs trust. From our offices in Huntington Woods, our lawyers represent clients throughout southeastern Michigan.