Planning your finances and will so that you can help provide for a disabled loved one can be a difficult task. It is best to always seek help from an experienced attorney who can put assets and accounts into the right forms to help protect them and provide for your loved one’s needs.
Planning to financially support a disabled or otherwise special needs loved one often involves trusts and special accounts. A trust can put the money under someone else’s control to provide income for your loved one’s housing, hospital bills, and other expenses. There are also special ways to keep these accounts from disqualifying your loved one for programs like Social Security Disability and Medicaid.
For help, call Flake & Flake’s special needs planning attorneys at (702) 829-5731 today.
What is a Special Needs Trust?
A special needs trust provides support to a disabled loved one without bursting their asset and income limits for various public programs they might qualify for.
Income and Asset Limits for Disabled Nevadans
When someone is on Social Security Disability (SSD) or other public programs like Medicaid, they have income and/or asset limits. For example, SSD blocks you from having more than $2,000 to your name, in total, excluding things like your house, car, and a few other basic necessities.
Disabled Nevadans, by definition, cannot usually work to support themselves, but SSD rules prevent them from having “too much” money as well.
Inheritances
While you are alive, you might be able to provide for a disabled child well into adulthood, so their assets remain low. But when you pass, giving them your money and assets outright would likely strip them of their benefits.
This could mean ending SSD, Medicaid, and other coverage they rely on to survive. This can happen even if you pass with no will, since your children would be the first to inherit under Nevada’s default rules.
Using a Special Needs Trust
A special needs trust is set up to provide a disabled child or loved one with funds to take care of them without putting the money in their name or their accounts. Instead, a trust divides the management and the benefit of the property.
You – or another caregiver, after you pass – can manage the money as trustee, and your disabled loved one can benefit from it, all without violating their asset limits.
Requirements for a Special Needs Trust in Henderson, NV
When you own money and property, you have control over it and benefit from it at the same time. To create a trust, generally, the “grantor” puts money into the trust and puts it under control of the “trustee” to be used for the “beneficiary.” This needs proper documentation stating the intent to create a trust.
For a trust to qualify as a special needs trust, it must meet these additional requirements:
Set Up by a Qualifying Person
Only these people are qualified to set up a special needs trust as the grantor:
- The disabled person themselves
- A parent
- A grandparent
- A legal guardian
- A court.
Disability and Age Requirements
A trust can only be treated as a special needs trust if the beneficiary is
- Under 65 and
- Is disabled. This usually uses the federal definition of disability, which means a condition that prevents them from being able to work to support themselves.
It does not matter if the disability is mental or physical. A wide range of serious health conditions and developmental disorders qualify.
Irrevocability
A trust can be “revocable,” meaning the grantor can end the trust and take everything back if they want. For a special needs trust, the grant must be irrevocable; the money is stuck in the trust and cannot come back out.
Transfers to the State Upon Death
The money in a special needs trust is only there to pay for things like the beneficiary’s healthcare. The trust must be set up in such a way that, after the disabled beneficiary dies, the money cannot be used for anything else.
This rule requires that the money goes to the state after the beneficiary’s death – or at least the amounts that would have been used for their medical assistance. This means you usually do not want to put extra money into the trust.
Reporting Requirements
When large expenses go out, they need to be reported to the state.
Other Uses of Money Count Against Income and Asset Limits
If the money in the trust is used for anything other than healthcare and support for the disabled beneficiary, then it might count as income or assets for the beneficiary or other people.
Here are two examples:
- If the trust buys the beneficiary a new TV, that amount might count as income.
- If the trust buys the disabled beneficiary a house for them and their spouse to live in, a portion of the money spent on the house may be treated as income for the spouse.
FAQs for Our Special Needs Planning Lawyers in Henderson
Why Do I Need a Special Needs Trust?
If the trust is a special needs trust, then Social Security and other benefits programs do not count that money against the beneficiary’s income or asset limits. Using a different type of trust – or using the money for a non-qualifying purpose – might count as income or assets and burst their limits.
The same is true if you manage money directly for their benefit without putting it into a trust: it can count as their income or assets and hurt eligibility.
Can’t You Just Look After a Disabled Child’s Finances for Them?
As mentioned, managing a disabled family member’s finances directly might mean some of your income or assets could disqualify them for benefits. Also, direct support only lasts as long as you are alive and able to manage the money.
Special needs trusts protect the money and can be used in estate planning. This means the money keeps flowing even if you become incapacitated or pass away.
Do You Need a Disability to Qualify for a Special Needs Trust?
For a trust to specifically qualify as a special needs trust, the beneficiary usually needs to be disabled and under age 65.
Other trusts might be more appropriate for someone who has a literal special need but no disability, such as a spendthrift trust for someone who cannot be trusted with a large pool of money.
Call Our Special Needs Trust Lawyers in Henderson Today
For a free case review, call the special needs trust attorneys at Flake & Flake at (702) 829-5731.
