Estate planning for a family member with special needs can be very challenging. Creating a Special Needs Trust allows someone with disabilities to receive the government funds they are entitled to, such as Social Security and Medicaid, but also get private funds to cover expenses that aren’t covered such as entertainment or recreation.
Disabled children and adults do not have short-term needs. They need to be cared and protected now, and in the future. Family members who have a disabled loved one need to make complicated plans to protect their loved one today, and always, including:
An estate planning lawyer familiar with special needs trusts can create a trust to protect the disabled person that will fulfill the goals set by the family.
Trusts allow disabled individuals to qualify for Medicaid but still have some funds for personal use. Illinois State and federal laws allow three different types of special needs trusts, depending on the circumstances.
1. Self-Settled or First-Party Special Needs Trust
A first-party trust is funded with assets owned by the disabled individual who is the beneficiary of the trust and is only for someone under the age of 65. These assets could be from an inheritance, a personal injury lawsuit or a divorce Every state has specific guidelines for a first-party special needs trust. When the beneficiary dies, the state’s Medicaid agency must be reimbursed.
2. Third-Party Special Needs Trust
A third-party special needs trust is funded by the assets of another person, typically the parents of the beneficiary, who leave them assets in their estate plan. A third-party person, the trustee. is named to manage the funds and to support the person with special needs. Because the third-party special needs trust owns the assets, and not the child, a properly special needs trust is not liable to the beneficiary’s creditors. When the beneficiary dies, remaining funds do not need to be reimbursed to the state.
3. Pooled Trust
In a pooled trust a nonprofit organization serves as the trustee. Pooled trusts are federally regulated trusts where funds are pooled for investment, but beneficiaries retain individual accounts. A pooled trust can be less expensive to establish and manage versus a first-party or third-party trust but are not as flexible. The trust will pay the state any money remaining in the trust after the death of the disabled individual, up to the amount paid on behalf of the individual under the state’s Medicaid plan.
A trust and estates lawyer in Lombard can assist you to create the right special needs trust for your situation, and protect your family member now and in the future.
Do you have questions about Illinois special needs trusts? Our experienced elder law attorneys understand applicable laws and advise you on the best options to protect a disabled person. Contact the Estate & Probate Legal Group at 630.800.0112