Are you a grandparent with a disabled grandchild? If so, you may be all too familiar with that push to do what you can to protect a loved one with special needs. There is often, however, the added difficulty in planning to provide for a disabled family member without jeopardizing his or her continued receipt of important government benefits. Fortunately, a third party special needs trust will allow you to provide support for your disabled grandchild and, when properly established, will not risk the loss of government benefits he or she may be receiving.
A third party special needs trust is one funded by someone other than the trust beneficiary, as opposed to a first party special needs trust which is funded by the special needs trust beneficiary. Properly setting up and funding the third party special needs trust can be critical in helping to ensure that the trust meets your objective of providing for your disabled grandchild without placing the receipt of government benefits, such as SSI or Medicaid, at risk of loss.
To establish a third party special needs trust, you will need to create a trust document and set forth the terms of the trust. You will also need to appoint a trustee who will be tasked with managing the trust on behalf of the beneficiary. You will also need to properly fund the trust. This will entail choosing which assets will be used to fund the trust and may include anything from real estate, to stocks, to cash. The property must be retitled so that the trust appears as the owner of the property as opposed to the person funding the trust. The trust may be funded now or at your death. If it is funded now, however, you must obtain an EIN.
Once funded, the trustee may use the funds held in the trust for the benefit of the beneficiary. Distributions from the trust must be carefully made as improper distributions, such as those made directly to the special needs beneficiary, could count against them when calculating his or her eligibility for government benefits.
If you have more questions about how you can provide financial support for your disabled grandchild without risking the loss of his or her government benefits, please reach out to our office.