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When do I need to think about a special needs trust?

A special needs trust is an estate planning tool residents of the Bay Area may want to create in order to provide for a loved one who has a disability. For example, parents of an adult child who cannot function independently should consider this option.

The special needs trust is one way Californians can provide for their disabled loved ones while making sure that a loved one can maintain important public benefits. These important benefits include medical care or government disability payments.

Eligibility for most of these public benefits will depend on the disabled person’s income and financial resources. Without planning, a large inheritance or gift could jeopardize these benefits.

Anyone who is concerned about a disabled loved one who is drawing public benefits should think about drawing up a special needs trust to benefit that loved one.

Are there alternatives to a special needs trust?

There are alternatives to creating a special needs trust.

For example, a disabled person could spend his or her resources legally so as to qualify for benefits.

Properly spending down property can be complicated, and not doing so correctly can lead to serious legal consequences.

On a related point, many public benefits programs allow people to prepay certain living expenses and then exempt those assets.

The definition of living expenses is fairly broad and can include even items like educational expenses and memberships at certain gyms and clubs.

In some cases a family may want to consider what is commonly referred to as an ABLE account. Subject to certain IRS rules and other regulations, a disabled person can use the funds in an ABLE account to pay for qualified expenses.

There may also be other options a family may want to consider. However, in many cases, a special needs trust really is the best option for a family with a disabled loved one.

 

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