Setting Up a Special Needs Trust to Protect Benefit Eligibility

Ensuring the financial stability and care of a loved one with disabilities is a crucial concern for many families. One effective way to secure their future while preserving eligibility for essential government benefits is by setting up a special needs trust. At Anderson, Dorn & Rader Ltd. in Reno, we specialize in helping families navigate this complex process, providing peace of mind and financial security for their loved ones.

Understanding Special Needs Trusts

A special needs trust (SNT) is a legal arrangement designed to benefit individuals with disabilities while preserving their eligibility for government assistance programs like Supplemental Security Income (SSI) and Medicaid. These trusts are created to hold assets that can be used for the beneficiary's supplemental needs without jeopardizing their access to these critical benefits.

Preserving Government Benefit Eligibility

One of the primary reasons families consider a special needs trust is to ensure that the beneficiary remains eligible for government programs. SSI and Medicaid have strict income and asset limits; receiving a large sum of money directly can disqualify an individual from these programs. A special needs trust allows funds to be set aside for the beneficiary's use without being counted as personal assets.

This careful planning ensures that your loved one can continue to receive the essential support provided by these programs while also benefiting from the additional resources available through the trust.

Setting Up a Special Needs Trust: Key Considerations

When establishing a special needs trust, several factors must be taken into account to ensure it meets the legal requirements and effectively serves its purpose. Here are some key considerations:

1. Type of Trust: Determine whether a first-party, third-party, or pooled special needs trust is most appropriate for your situation. Each type has different funding sources and implications for eligibility.
2. Trust Document: The trust must be drafted carefully to comply with federal and state laws. It should explicitly state that the funds are to be used for supplemental needs and not for basic support, which government benefits cover.
3. Funding the Trust: Decide how the trust will be funded. Common sources include inheritances, personal injury settlements, or contributions from family members.
4. Choosing a Trustee: Selecting the right trustee is crucial. The trustee will manage the trust's assets, make distributions, and ensure that all legal requirements are met. It is often beneficial to appoint a professional trustee with experience in managing special needs trusts.

The Role of the Trustee

The trustee plays a vital role in managing a special needs trust. Their responsibilities include:

• Managing Assets: The trustee must invest and manage the trust's assets prudently to ensure that funds are available for the beneficiary's lifetime.
• Distributing Funds: They must make distributions according to the trust's terms, ensuring that the funds are used for approved expenses that enhance the beneficiary's quality of life without affecting their benefit eligibility.
• Compliance: The trustee must comply with all legal and regulatory requirements, including filing tax returns and providing accountings to relevant parties.

Given the complexity of these duties, families often choose to work with professional trustees or fiduciary services to ensure that the trust is managed effectively and in the best interest of the beneficiary.

Contact Anderson, Dorn & Rader Ltd.

Setting up a special needs trust is a significant step in securing your loved one's future. At Anderson, Dorn & Rader Ltd., we understand the intricacies of these trusts and can guide you through the process with expertise and compassion. Contact us today for a personalized consultation to explore how a special needs trust can be tailored to your family's unique situation, ensuring that your loved one receives the care and support they need without compromising their eligibility for essential government benefits.