Berge & Berge, LLP Blog

Sunday, September 20, 2015

Including a Special Needs Trust Within a Revocable Living Trust

How Is It Best to Protect a Beneficiary Who Has Special Needs?

There are a number of reasons why a family may wish to set up a special needs trust as a sub-component of their estate plan. As the name suggests, special needs trusts are designed to offer financial protection for a beneficiary who suffers from a physical and/or mental disability and – in most cases – is receiving supplemental income from the state or federal government (e.g., Social Security and/or Medicaid).

If a testator were to leave a lump sum of money outright to an individual with special needs, this dramatic increase in assets could lead to the unintended result of the beneficiary losing his or her monthly benefits – or at least experiencing a significant decrease in them. In such a case, the testator's intention to offer assistance to the beneficiary would be thwarted, causing the beneficiary to lose significant funding. To avoid this result, a special needs trust can help funnel money and assets to an appropriate place, thereby providing financial security to the beneficiary while still helping the beneficiary maintain the supplemental income they are entitled to.

When setting up a special needs trust, it is vital to select a trustee to help the beneficiary manage the trust assets in accordance with the established guidelines set forth by entities like the Social Security Administration or Medicaid. Generally, the funds derived from a special needs trust must be used for purposes of maintaining the beneficiary’s health and wellness, and are not to be used for purposes already covered by the recipient’s monthly income. Choosing a trustee who is familiar with the regulations – or is willing to seek guidance from an experienced professional – is the best way to ensure that the bequest is honored and the beneficiary is protected.

Likewise, the trustee must ensure the beneficiary does not have unfettered access to the funds, as this could trigger a reduction or elimination of government benefits.

If you are considering a bequest to a special needs family member and would like to ensure that the special needs trust is handled with careful consideration, please contact the Law Offices of Berge & Berge. Located in San Jose, California, and serving clients throughout the South Bay area, we can be reached at: 408-985-9918.

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