If you have a family member with special needs due to a permanent disability, you may worry about how that person will be cared for after you are gone. You won’t be around to provide for them forever, which is why it is important to plan ahead using estate planning tools like a supplemental special needs trust.
How Special Needs Trusts Work in New York
Simply leaving assets directly to a child with special needs can actually cause them extreme financial hardship. Having too much money on hand can run afoul of government regulations that could impact their disability benefits.
With a funded special needs trust, the beneficiary won’t lose out on Medicaid or SSI payments they require to cover medical and basic living expenses. When drafted properly, disbursements from these trusts don’t count as income towards those programs.
Using trusts also protects your assets from the potentially lengthy probate process and helps ensure an heir with special needs has access to what they need quickly in the event you pass away. There are three main types of supplemental trusts that can be useful to families with a special needs child:
- Pooled trust. Also known as a community special needs trust, these legal entities have already been created by New York non-profit organizations and have trustees and a board of directors to oversee disbursements.
- First-party or self-settled trust. As long as the special needs individual is under 65, they can fund this type of trust themselves with an inheritance and then maintain access to the funds.
- Third-party trust. This irrevocable trust is set up and overseen by a family member and can have specific provisions for how the funds are used.
Be sure to speak with an attorney about which route would be best for your family’s specific situation. These types of trusts must be crafted carefully to adhere to state laws, and an experienced attorney can explain what funds from the trust can and can’t be used to purchase while warning about potential tax implications.
Protect Your Family and Preserve Your Legacy
Setting up and funding a special needs trust should just be one part of your overall estate planning strategy to safeguard the assets you worked hard to earn. Read our free estate planning handbook for more info, and then give us a call to discuss how we can build a plan around your family’s circumstances and protect your special needs loved one.