A special needs trust may be an effective tool for parents who are concerned about their child’s welfare after they are gone. Putting assets into such a trust may ensure that the child is eligible for Medicaid while still having access to them if necessary. By transferring the assets into a trust, it also avoids the look-back period that could impact eligibility.
There are many advantages of creating an SNT such as the tax-deductible status of funds used to create it. Assets placed inside of the trust cannot be accessed by creditors or others to settle a judgment. Since the trust is only designed to provide for a disabled individual’s needs, there is no need to worry about funds being manged or used improperly. The money inside of the trust can be used in addition to whatever government assistance may be provided.
Before creating the trust, it is important to consider that the trustee has significant control over how funds are used. The beneficiary must ask the trustee to release funds whenever they may be needed, which could lead to a perceived lack of independence. This type of trust may also have high yearly costs as well as high minimums to create it.
Trusts may provide for asset protection as well as greater control over how assets are used. Therefore, they may be effective in helping a child or others with special needs best use the resources that they have to get the care that they need. It may be worthwhile to consult with an attorney prior to creating a trust to learn more about its structure as well as how much it may cost to create.