In this Elder Law Minute, Paige Fox explains how a third party special needs trust can protect a disabled child’s benefits and future inheritance.
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Video Transcript:
Hi. My name is Paige Fox. I’m a Senior Associate attorney here at Dent Coulson Elder Law. And I understand these topics are very complex, so I’m hoping these Elder Law Minutes can bring some insight and some more understanding to both potential clients and current clients. Thank you.
Today we are here to discuss estate planning, specifically how to provide for your child with a disability via your estate plan. One of the most common ways to do this is via the creation of a third-party special needs trust.
A third-party special needs trust, basically, is a trust that you create on behalf of another individual, which is funded with your assets at the time you pass away. So, for example, if you create a third-party special needs trust, instead of leaving money directly to your child with the disability, you can leave the money to the special needs trust for your child, which then keeps the money that they’re receiving from the inheritance outside of their assets and in a separate bucket of assets for their benefit, rather than in their individual name.
And the importance of having this money outside of the individual’s assets is because if it is not considered their money, then it cannot impact any public benefits that they receive or any other sort of assistance, whether it’s SSDI, SSI, or any other public benefits. If it’s kept in a third-party special needs trust, the money is never considered that individual’s money, and therefore it cannot impact their benefits.
Another benefit of having a third-party special needs trust is there is no payback provision that is required to be included in the trust. So when we talk about special needs trusts, there’s a third-party special needs trust, which is what we were just discussing, and there’s also a first-party special needs trust.
A first-party special needs trust: any assets that are in that trust were considered the beneficiary’s money at one point in time, and therefore the money in a first-party special needs trust has a payback provision. And that payback provision basically says after the person’s lifetime, any money that is left in that trust can be paid back to the state of Illinois for as much as the state of Illinois paid on behalf of that individual.
However, if it is a third-party special needs trust, again, the money is never considered the individual’s with the disability’s asset, and therefore it not only does not impact their benefits, but it also does not require that any of it be paid back after that individual’s lifetime.
Another benefit of having a third-party special needs trust is if you have other family members or friends who are planning on leaving money to your child with a disability, rather than leaving it directly to the child, they can again amend their estate plan or create an estate plan that names the special needs trust as the beneficiary instead of your child.
And so again, there’s lots of different planning that can be done for individuals with disabilities, but particularly the third-party special needs trust is one of the ways that you can plan for a child with a disability or another loved one who has a disability ahead of time, and to make sure that money is spent on their behalf as needed and does not impact their benefits.
So, if you or anyone you know is looking for estate planning and/or special needs planning, feel free to reach out to Dent Coulson Elder Law, and we are happy to assist.
Contact Us for Assistance
Thank you for watching our Elder Law Minute. If you need help with powers of attorney or any other estate planning needs, please call Dent Coulson Elder Law.
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Dent-Coulson Elder Law is dedicated to providing families in the St. Louis area with their Elder Law needs. Our practice areas include Asset Preservation Planning, Veterans Benefits, Medicaid Eligibility, Alzheimer’s Planning, Special Needs Planning, Estate Planning and more. We understand the financial challenges you may face as you and your loved ones grow older. At Dent-Coulson Elder Law, our clients’ well-being is our number one priority. For immediate help, call (618) 632-7000 (IL) or (314) 567-9292 (MO), or Contact Us and we will get in touch as soon as possible.
