Supplemental and Special Needs Trusts

A supplemental needs trust is a trust that is created by someone, other than the beneficiary, usually a parent, grandparent or family member, for the benefit of a disabled beneficiary. A supplemental needs trust allows for an individual to appoint a trustee to take care of your property on behalf of your disabled child after you have died. This is a very important trust to have your Minneapolis estate planning attorney set up for you because this allows your child to receive your assets without being penalized by any government programs that they may need, such as Social Security or Medicaid.

Benefits Of A Supplemental Needs Trust
There are a number of benefits to a supplemental needs trust. It’s a wise decision to make because placing other family members in charge of the money can cause a variety of problems. For instance, a relative in charge of the money may lose it due to bankruptcy, divorce settlements, or judgments against them. In other words, their personal problems can result in the loss of the disabled beneficiary’s money. The relative can’t be made to legally use the money for the beneficiary when it is in their control. The relative may even be taxed at a higher rate, thus causing them financial consequences for having the money.

By establishing the supplemental needs trust, these problems are avoided and the beneficiary can enjoy the extra benefits of having the money from the trust. They can use their money for clothing, travel, or anything that they need that cannot be covered by their other benefits.

How To Fund The Trust
The trust can be funded in a number of ways that include gifts from relatives or from a will. All of the contributions are made directly to the trust rather than to the disabled beneficiary. Many trusts are funded by second-to-die or survivorship insurance policies. That way the disabled beneficiary does not have to be cared for by the trust until both parents have died.

A properly drafted supplemental needs trust will ensure the child does not lose their benefits eligibility.

Writing A Letter Of Intent
The Letter of Intent can be an important document in your estate plan. You can have your Minneapolis estate planning lawyer help you draft the letter because it will outline to your disabled child’s trustee what your wishes are. The letter can include:

  • Financial details
  • Your child’s medical details
  • Contacts
  • Any special abilities your child may have
  • Problems you wish to avoid
  • Life goals of your child
  • There are many things that you can include in the letter to ensure that your child’s best interests are taken care of.

    A special needs trust is a trust created for the benefit of a person with a disability who is under the age of 65. Special needs trus are established by someone other than the disabled individual and are used to provide for the individual’s needs that are not provided by government funded programs. Distributions for these additional needs must be made directly to the person/entity providing the additional benefit/service and not to the disabled individual. Special needs trusts are funded with the assets of the disabled individual. They cannot hold assets that belong to someone else (i.e., parents cannot add assets to the trust during life or upon death).

    Upon the disabled individual’s death, these trusts must contain a “payback clause.” This is generally done by having the individual’s estate as the beneficiary so that the applicable governmental agencies that provided benefits to the individual during his/her lifetime can be reimbursed if there are any assets remaining in the special needs trust upon death.

    Contact Eastlund Hutchinson at (952) 894-6400.