Any of our Michigan readers familiar with previous posts here know that there are a wide variety of reasons to establish trusts as part of an estate plan. Many people incorporate trusts into their estate plans to maximize tax planning scenarios for beneficiaries. Others are simply interested in protecting inheritance – making sure that certain assets go to certain people or charities. However, there are many people who set up trusts to financially protect someone close to them who has special needs. These types of trusts can be especially important to those interested in protecting children with special needs.
A recent article detailed many of the issues to address and concerns to consider when trying to determine how to go about setting up a special needs trust. First, there are eligibility concerns to be aware of, because many disabled people receive federal Supplemental Security Income and Medicaid benefits. However, one basic rule of thumb laid out in the article is this: if someone is considered disabled under federal law, they are probably eligible to be a named beneficiary in a special needs trust.
Next, there are different kinds of trusts within this area to consider, depending on where the funding for the trust will come from. Some trusts are set up to be funded in the event of the untimely or sudden death of a caretaker, essentially funding the trust from that person’s assets. Others are funded by settlements from lawsuits, if a disability arose through another party’s negligence and a lawsuit was successful.
These are just some of the concerns that could arise in considering a trust for this specialize type of situation. In general, the more a person learns about the benefits and drawbacks of trusts, the better the position a person will be in to determine whether or not to include a trust within an estate plan.
Source: The Fiscal Times, “Estate Planning Guide for a Special Needs Child,” Sonya Stinson, July 10, 2013