Parents in Michigan often leave the proceeds from their estate to their children and grandchildren. However, if a child has special needs, having a trust that provides for them after your death is critical. The team at Bingham Legal Group PC has experience helping clients assess their situation and implement the type of trust that best meets their needs.
Special Needs Answers states that a special needs trust frequently supplements the benefits a person with specific needs receives from government programs. When properly set up, the beneficiary gets funds from the trust, not your estate, which allows them to continue receiving his or her benefits. There are three parties that work together with this estate tool:
- Donor – You, the person who supplies the funds
- Trustee – The individual who administers the funds, per donor wishes
- Beneficiary – Your child, the person who receives the benefit of the funds.
Donors typically define how the fund’s trustee should use the assets in a formal document. There are three types of special needs trusts: Pooled, first-party and third-party. Each can be tailored to meet the needs of a specific beneficiary. The difference has to do with the guidelines regulating Supplemental Security Income. Charities often set up pooled trusts, investing the total funds of several trusts, while still maintaining separate accounts.
A beneficiary who receives SSI cannot have more than $2,000 to their name, or they will lose the governmental benefit unless it is in a first-party special needs trust.
Parents of a person with disabilities often implement a third-party trust. Unlike a first-party trust, there is no payback provision. The funds can pay for items that the government benefits do not cover, such as assistive equipment, technology such as computers and living facilities.
Taxable estate size may be significantly reduced when an experienced professional correctly drafts a trust for a specific set of needs. Visit our webpage for more information on this topic.