A person who lives with disabilities and relies on government assistance for income can be put in a difficult situation if he or she suddenly becomes the beneficiary of a loved one’s estate. There are very restrictive limits on the amount of income a person on disability can receive without losing benefits. When a person with disabilities becomes the beneficiary of an estate or wins a court settlement, it can jeopardize their regular SSI income and create a difficult financial decision.
Fortunately, a special needs trust fund can provide a remedy to the problem. A special needs trust fund is a trust in which the property of a beneficiary is held in trust by a third-party trustee. That trust fund can be used to provide for specific expenditures for the beneficiary without putting disability benefits in jeopardy. Read on to learn more about the advantages of a special needs trust fund.
Protects Income Status
Because the limits on income for those who depend on disability benefits are strict, a special needs trust fund provides a vehicle to shield the beneficiary from the impact of inheritance or court settlement. That’s because the money and assets held by the trust technically don’t belong to the beneficiary. They are the property of the trust and the trustee, so they don’t count as income for the beneficiary.
Provides Improved Quality of Life
The money held in trust can still be utilized to better the life of the beneficiary, as it can be used for a wide range of purposes. Funds held in the trust can be used for services such as home health care, phone, landscaping services, fitness equipment, pets, and gas. They can also be used to purchase non-countable assets by SSI definition, which includes things such as a car, primary residence, life insurance, personal items, furniture, and burial policies.
Several Set-Up Options
A lawyer specializing in estate planning can help establish a special needs trust for beneficiaries who rely on SSI payments for income. An individual, or (d)(4)(A), trust can be established that will give a high degree of flexibility to the trustee and beneficiary. However, such trusts can be expensive to create and maintain. Another option is the creation of a pooled special needs trust or (d)(4)(C). Such a trust is actually formed under administration of a nonprofit organization, and each beneficiary has an account. It provides great flexibility and convenience to the beneficiary. The PSNT also provides for investment of funds in the trust, which can help yield greater benefits over time. A special needs trust fund can provide an excellent estate planning tool for those who plan to leave funds and assets for people who depend on SSI income. It can protect SSI recipients from jeopardizing benefits while providing a better quality of life through a managed trust fund.