Special Needs Trust

Special Needs Trust

Special Needs Trust Attorneys in Phoenix, Arizona

As leading estate planning attorneys in Arizona, our law firm has helped countless clients achieve their financial goals and secure their legacies. Ready to explore your legal options? Contact our law office online to schedule a consultation

Contrary to popular belief, estate planning isn’t just for the ultra-wealthy. Almost everyone can benefit from creating an estate plan—especially individuals with dependents.

In situations involving dependents, such as minor children or individuals with disabilities, establishing a comprehensive estate plan can help ensure a person’s loved ones are taken care of after they pass. However, not all special needs planning tools are equally effective in achieving this end, particularly when the dependents have special needs.

If you care for an individual with disabilities, you may want to consider creating a special needs trust. This particular type of trust is designed to hold assets for a special needs beneficiary while also ensuring they still qualify for the government assistance they deserve.

In this article, we will explain everything you need to know about special needs trusts, their benefits, important considerations, and how a special needs trust attorney can help.

When a Special Needs Trust Is Needed

special needs trust (SNT) (also known as a supplemental needs trust) is designed to manage the assets of an individual with disabilities without compromising their eligibility for government programs like Medicaid and Supplemental Security Income (SSI). Assets placed into this trust are not counted as personal assets, and can not be used to disqualify a person from receiving government assistance.

Special needs trusts can be helpful in several different scenarios, including the following:

  • When leaving money to a person with disabilities. If a person with disabilities receives an inheritance or significant gift directly, it may jeopardize their eligibility for needs-based government benefits. By placing those assets into an SNT, you can ensure that money will be used to benefit the person with disabilities without affecting their eligibility.
  • When a person with disabilities receives a settlement. If a person with disabilities receives a settlement, such as from a personal injury lawsuit, that money could disqualify them from government benefits. Placing the settlement into an SNT will ensure they can benefit from that money while still qualifying for government assistance.
  • When managing assets for someone with disabilities. If your loved one with disabilities is unable to manage their own finances, a special needs trust provides a way for you to manage and protect their assets without disqualifying them from receiving government benefits.
  • When providing for their future needs. Even if your loved one with disabilities does not currently receive government benefits, they may rely on them in the future. Setting up an SNT can be a proactive step in ensuring the inheritance you leave them doesn’t jeopardize their ability to qualify for assistance.

Every state, including Arizona, has its own rules about how special needs trusts must be structured, and ensuring legal compliance with both federal and state laws is critical.

Advantages of a Special Needs Trust

As a highly customizable estate planning tool, an SNT offers a structured way to manage assets according to specific needs, as well as protection against financial exploitation. These trusts also offer flexibility in terms of how funds can be used, allowing them to pay for a broad range of services and goods that improve the beneficiary’s quality of life.

Another benefit of a special needs trust is that it is not subject to probate. Going to probate court can be an expensive and lengthy endeavor, and avoiding the probate process allows the beneficiary to benefit from the trust without delay. Lastly, establishing an SNT can provide family members with the peace of mind that comes from knowing that their loved one with disabilities will be taken care of.

Different Types of Special Needs Trusts

Special needs trusts come in a variety of forms, each with a specific purpose and setup. Here are a few different types of special needs trusts:

  • First-party special needs trusts. Also known as self-settled SNTs, these trusts are funded with the beneficiary’s own assets, such as inheritance, settlements, and savings. Upon the beneficiary’s death, any remaining assets are typically used to reimburse the government for benefits received by the beneficiary.
  • Third-party special needs trusts. These trusts are funded by someone other than the beneficiary, typically parents, grandparents, or family members. After the beneficiary passes away, any remaining assets are distributed in accordance with directions from the trust document, rather than used to repay the government.
  • Pooled trusts. Pooled trusts are managed by nonprofit organizations and combine assets from multiple beneficiaries into a single trust (although each beneficiary has their own separate account within the trust). It can be funded with assets from beneficiaries or third parties. Upon the beneficiary’s death, the remaining funds in their account typically stay in the larger trust, but not always.

Choosing the right trust involves numerous considerations, including the beneficiary’s circumstances and the special goals of the trust. It’s a good idea to consult a special needs trust lawyer when determining the best trust for your situation.

The Responsibility of a Special Needs Trust Trustee

As irrevocable trusts, SNTs cannot be altered or revoked once established, and they must be designed so that the beneficiary does not have direct access to the funds. The trust’s funds are spent by a trustee on the beneficiary’s behalf, to enhance their quality of life beyond what government benefits provide.

When creating a special needs trust, choosing the right trustee is of critical importance. The trustee will have a wide range of responsibilities that require a keen understanding of the beneficiary’s needs and a thorough knowledge of relevant laws and regulations. A special needs trust trustee will be responsible for the following:

  • Managing trust assets, which includes investing the trust’s assets appropriately, ensuring the assets are protected, and balancing growth with the need for asset liquidity
  • Understanding the beneficiary’s needs, including their physical, emotional, and health care needs, to make informed decisions about disbursements
  • Making disbursements carefully, which requires a deep understanding of what types of expenses can be paid for with trust funds without affecting eligibility
  • Maintaining records and accounting, which includes keeping detailed records of all of the trust’s income, distributions, and expenditures, as well as making records readily available for review
  • Ensuring legal compliance by filing necessary tax returns and reports with state and federal agencies in an efficient manner
  • Communicating with the beneficiary and interested parties, including family members and guardians, with regular updates on the trust’s status, as well as being available to discuss the beneficiary’s needs and how the trust can address them
  • Advocating for the beneficiary, ensuring they receive the government benefits they are entitled to and can access the community resources and services that improve their quality of life

As you can see, the role of a special needs trust trustee is as complex as it is important. That’s why many people choose to name an attorney as the SNT trustee, though it is not always necessary. If someone else assumes the role of trustee, they will likely need to work closely with an attorney and financial advisor.

Copper State Planning: Top Estate Planning Attorneys in Arizona

If you care for a family member with disabilities, their future rests in your hands. An experienced estate planning lawyer can help you design a special needs trust that accounts for all of their evolving needs. Ready to get started? Contact Copper State Planning to schedule a consultation with a compassionate legal representative.

contact us

Let’s Talk

I’m sure you have a lot of questions. And we’re here to answer them. Just give us a call or fill out the form to the right and we’ll call you.

    What would you like help with? *