← Articles & Publications

Would A Special Needs Trust Benefit My Loved One?

If you serve as caretaker for a person with special needs or a disability, you recognize the feelings of deep care – and concern – that arise when planning for your loved one’s future. What will happen to them if you become unable to provide quality care for their lifetime? Or how can you accommodate their need for some independence, while continuing to assure that their future is secure? How can you maximize your loved one’s quality of life through government benefits and your own provision?

A special needs trust, created by a qualified estate planning attorney, can supply you with a legally sound yet flexible instrument to sustain your loved one for years to come.

If you are unclear as to how a special needs trust operates, you are not alone. Special needs trusts can be complex and involve multiple parties. North Carolina trust law, federal assistance programs, and specific regulations on special needs trusts compound the issue. While an experienced estate planning attorney remains your best resource, you can utilize the special needs trust overview below to assist in your decision-making regarding your loved one with a disability or special needs.

What is a special needs trust?

Like any other trust, a special needs trust is a legal entity that holds assets for the benefit of an individual or family. The acting parties in a trust include the grantor (the person who funds the trust), the trustee (the person who manages the trust), and the beneficiary (the person for whose benefit the trust is formed). The beneficiary in your family’s special needs trust will be your loved one with special needs or a disability. If that person has assets of his or her own (for example, an inheritance), he or she may also be the special needs trust’s grantor. If you or your family will fund the trust, each of those involved with funding are called grantors. Your family will also need to appoint a trustee to provide faithful oversight of the trust’s assets. A special needs trust can hold a range of asset classes, including cash, investments, and property.

How, specifically, will a special needs trust benefit my loved one?

An attorney-prepared special needs trust can protect your loved one by shielding assets earmarked for his or her benefit safely within the trust. This way, your loved one will gain a dual benefit: increased security due to the trust’s provisions, and continued eligibility for much-needed assistance programs, including Medicaid, Supplemental Security Income, housing allowances, and more. A special needs trust maximizes the beneficiary’s ability to secure and maintain the best quality of life possible. Aside from sound legal drafting, what will make a special needs trust most beneficial to your loved one is a trustworthy person serving in the office of trustee. In fact, the trustee in a special needs trust must serve in a fiduciary capacity, that is, in the beneficiary’s best interests. This way, your loved one with special needs or a disability will be protected on all fronts for the duration of his or her life.

Which type of special needs trust is best for my loved one?

Under North Carolina law, three types of special needs trusts exist. As mentioned above, a special needs trust can be funded either by the beneficiary’s own assets, or by family members or other interested third parties. The first type of special needs trust is called a self-settled special needs trust, available only to beneficiaries under 65. While the beneficiary’s assets provide funding, the trust itself must be established for the sole benefit of the disabled individual by a responsible party (i.e., the disabled individual, a parent, grandparent, guardian, or court). North Carolina law also requires this type of trust to make reimbursement to Medicaid out of funds remaining after the beneficiary’s death. Another type of self-settled trust, called a pooled special needs trust, is available to those of any age. Due to its ability to be established by the beneficiary, a pooled trust also qualifies as a self-settled trust. As its name implies, however, a pooled trust may “pool” the resources of many parties to fund the beneficiary’s special needs trust. A pooled trust must have a nonprofit association as its manager, and must also reimburse Medicaid as above. A third party special needs trust is funded by a family member or other interested party, for the benefit of a person with special needs or a disability. There is no maximum age for a third party trust, and this type of trust is not required to repay Medicaid for expenses incurred by the beneficiary. If you are unsure which type of special needs trust will best serve your loved one, speak to a qualified estate planning attorney for personalized guidance.

How can I ensure that my loved one will remain eligible for government benefits?

In order to maintain eligibility for Supplemental Security Income, Medicaid, or certain other governmental assistance programs, a North Carolina resident must maintain a very low amount of assets and income. This can become problematic if the person’s expenses are paid by a family member or an inheritance, as any outside income can affect eligibility. Creating a special needs trust will enable both government funds and family funds to be spent in the most judicious manner possible. This way, your loved one with special needs or a disability will possess the tools to live his or her best life possible. However, caution and legal guidance is prudent when making disbursements from a special needs trust directly to the beneficiary. Only certain types of expenses will not affect state and federal assistance eligibility (for example, paying the beneficiary’s school tuition and home repairs are allowed by NC regulations, but certain expenses for utilities or groceries could affect eligibility). Seek good counsel to maintain your loved one’s benefits within the law.

What are my next steps?

Now that you know how special needs trusts work, take action to protect your loved one’s future. Gather important documents regarding your loved one’s livelihood – any income, assets, Medicaid documents, food stamp information, and living costs. Decide who will serve as the trustee for your loved one’s special needs trust – you, another family member, or trusted guardian. Then, contact one of our trusted estate planning attorneys today!

Next Article

Top 10 Estate Planning Techniques

Over half of all Americans do not have an estate plan in place, despite understanding the importance of having one.…

Get In Touch

We are here for you.
  • This field is for validation purposes and should be left unchanged.

Free estate planning worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

Meet the Attorneys