Using Trusts to Protect Children With Disabilities
July 15, 2013
There are few areas of estate planning or elder law more complex than the formation and administration of special needs trusts. These trusts come in several forms, but the two most common are testamentary special needs trusts (formed by your Will) and common-law third-party special needs trusts (formed during life using a parent's funds for a child, usually as part of Medicaid-planning).
Trusts formed as part of a Will do not spring into effect until your death, when funds from your estate are used to form a trust for the sole benefit of a special needs individual. Trusts formed during your life for Medicaid-planning purposes are a popular exception to the “5 year look-back rule” which prevents Medicaid applicants from transferring assets to children via gifts. Both require drafting by an attorney well-versed in the federal and state laws applicable to such trusts, and both can significantly benefit children or grandchildren who currently receive (or may require in the future) government benefits.
If you have a child or other heir who has special needs or disabilities, it is important to consult a knowledgeable attorney to assist you in preparing a plan that ensures your funds are properly applied to the future needs of such a beneficiary.