Things you need to know about special needs trusts

Estate plans are not “off the shelf” products. Every will or trust should be individually tailored to meet the circumstances of the person and his/her goals for the disposition of their assets. There are several different kinds of trusts that can be used to save taxes, protect spendthrifts, take care of minors, etc.  For individuals with disabilities receiving government assistance, there are Special Needs Trusts drafted to safeguard those government benefits and, at the same time, allow for an inheritance or gift that can provide some extra funds to supplement that disability income.

Distribution requirements
The most important thing about a Special Needs Trust is the language that allows for the distribution of funds from the trust. At NO time should the beneficiary of the trust be given any right to or be entitled to the income or principal of the trust. If he/she has those rights, they are incidents of ownership that may jeopardize the government benefits they are receiving. The trustee(s) must be given the sole discretion to distribute any principal or income to the beneficiary and only for the standards allowed.

Standard reasons to distribute funds
Some examples of standards that might be given for the distribution of funds are items for care and comfort that their current income would not allow for; money for a vacation, funds to obtain and care for a service animal or pet, money for companion care, etc.  

How funds are distributed
Whenever possible, funds from the trust should be paid directly to the provider and not be given to the beneficiary. If funds are given to a beneficiary, they should only be for reimbursement of items that would conform to the standards of the trust and be documented by receipts showing the expenses and what those expenses were for. 

When to create a special needs trust
These trusts can be established during a lifetime and funded with gifts, or by an inheritance at the time of death. If they are not in existence during the lifetime of the decedent donor, they can be created in the will or trust of the decedent donor. There are post-mortem ways to create a Special Needs Trust but those can be more complicated and challenging to accomplish.

The TS Prosperity Group has expertise in administering Special Needs Trusts. If you have a family member or loved one who is receiving government assistance because of a disability and would benefit from a Special Needs Trust, please reach out to us as you work with your attorney to draft this document.

Contact us at 844-487-3115 about any of your current retirement, estate planning or investment needs and we will be happy to answer them to keep you and your family on the path to generational prosperity.

Mary Jewell_updatedMary Jewell serves as a Fiduciary Officer and Vice President for the TS Prosperity Group. She began her career with TS Bank in 2012. Prior to working at TS Bank, she was an agricultural estate-planning specialist for Farm Credit Services and spent 12 years as a trust officer for another regional bank. She spent four years as a planned giving officer for a public foundation and shares her expertise with the Treynor State Community Foundation. She also raised funds for a local non-profit. Mary received her undergraduate degree from the University of Nebraska-Lincoln and her Juris Doctorate from Creighton University. She stays busy with her family of six children and volunteers her time at the Joslyn Castle, the New Cassel Foundation Board, and the Center, in Council Bluffs. She is a member of the Omaha Estate Planning Council and the Nebraska State Bar Association.

Topics: Wealth Management