Planning for your family’s future security after you pass away 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 family’s needs be met? At MHPS, we understand the anxiety you are feeling. Our experienced Nashville special needs trust lawyers are ready to help. We’ll 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 qualify for government benefits. This includes services 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 family member a gift of $25,000 in your will, you would disqualify them from these benefits. An influx of wealth can make one ineligible for Veterans Aid and Attendance and government housing, as well.
However, a special needs trust can work around this issue. This is also known as a supplemental needs trust. It provides 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. 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 trustee will have complete discretion over the trust. They will also be in charge of how to spend the money on your loved one’s behalf. Remember that the trustee has the fiduciary duty to act in the best interests of those who benefit 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. This can be an inheritance or a settlement from a lawsuit.
These trusts must contain a “payback” provision. This means when the recipient dies, any remaining funds in the trust can go to several places. It can go back to the state for Medicaid costs Tennessee has or is paying on behalf of the individual.
Pooled Special Needs Trust
Instead of naming one individual to be the trustee, a nonprofit organization can administer the trust. 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.
Third-Party Special Needs Trust
Unlike a first-party trust, a third-party special needs trust is created by someone who is contributing funds to the trust. Funds are generally from a benefactor. These can range from life insurance policies, real estate properties, 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 pass on to another person or go to an organization.
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 MHPS, have been helping clients in 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.