Planning for your loved one’s future security after you’re gone is hard enough. But when you have a family member that has special needs, chances are you have many concerns. Who will be there to take care of them after you pass away? How will your loved one’s needs be met? At Martin Heller Potempa & Sheppard, PLLC, we understand the anxiety you are feeling. Our experienced Nashville special needs trust lawyers are ready to help you create a special needs trust for your loved one to help secure their future.
What is a Special Needs Trust?
According to Tennessee law, an individual needs to have a limited income to be qualified for government benefits such as Medicaid and Social Security Income. If the individual receives more than the state limit, these services will be cut off to that person. For example, if you leave your loved one with a gift of $25,000 in your will, that would disqualify them from these benefits. An influx of wealth can make one ineligible not just from Supplementary Security Income or Medicaid, but also Veterans Aid and Attendance, and government housing.
However, a special needs trust can work around this issue. Also known as a supplemental needs trust, it is designed to provide for someone with special needs without jeopardizing any government benefits that person may be receiving. Instead of leaving this gift directly to the person, you are putting it in a trust. And since your loved one does not have control over these funds, the government program administrators ignore the trust when determining eligibility.
When you set up a special needs trust, the person you appoint as trustee will have complete discretion over the trust as well as be in charge of how the money is spent on your loved one’s behalf. Remember that the trustee has the fiduciary duty to act in the best interests of those who are benefiting from the trust.
The Different Types of a Supplemental Needs Trust
There are three types of special needs trusts available for a person with a disability.
Self-Settled Special Needs Trust: Also known as a first-party or payback trust, the funds from this trust come from the money that the beneficiary will soon receive, such as an inheritance or a settlement from a lawsuit.
These trusts must contain a “payback” provision, meaning when the recipient dies, any remaining funds in the trust will be paid back to the state for whatever Medicaid costs Tennessee had paid on behalf of the individual.
Third-Party Special Needs Trust: Unlike a first-party trust, a third-party special needs trust is created by someone who is contributing the funds to the trust. Funds are generally from a benefactor and can range from life insurance policies, real estate, and investments.
The difference between third-party trusts and self-settled trusts is that these funds do not belong to the individual. So once the beneficiary passes away, the remaining assets in the trust can be passed on to another person or go to an organization.
Pooled Special Needs Trust: Instead of naming one individual to be the trustee, you can have the trust administered by a nonprofit organization. Although each beneficiary has their own separate account, the assets in this trust are a combination of several investments from many families. The trustee of your family member’s account is chosen by the nonprofit and has the authority to spend the money on behalf of the beneficiary.
Why You Need Our TN Special Needs Trust Lawyers
Setting up a trust is a complicated process. And if a special needs trust is not properly created, the person who will hurt the most will be your loved one. For decades, the special needs trust lawyers at Martin Heller Potempa & Sheppard, PLLC, have been helping clients throughout Nashville, Franklin, Bellevue, and throughout Tennessee with their estate planning needs. We understand the complexities surrounding the creation of a trust and will guide you through the process.
If you need assistance with establishing a special needs trust for a family member, contact our estate lawyers today for a free consultation.