When you have a family member or loved one with a mental disability or a condition that prevents them from overseeing their finances, a special needs trust can be a safe way to house assets for them to use in the future.

What are the benefits of a special needs trust?

Special needs trusts allow you to contribute assets and funds for a disabled family member or beneficiary. The prerequisites of SSI and Medicaid require those receiving the benefits to have no more than $2000 in assets plus a limited income source. When thinking about that person’s future needs, here are some advantages of a special needs trust:

  • Supplemental security income (SSI)/Medicaid benefits: Without a special needs trust, there could be delays or complications in your loved one receiving SSI or Medicaid. Real property like a home, car or other physical elements of those properties would not necessarily affect your loved one’s eligibility for SSI and Medicaid, but other assets may prevent them from receiving benefits.
  • Provide ongoing support: A special needs trust can protect your assets for the benefit of your loved one. It is important that you consider the future needs of that person, whether they are financial or medical. For a person who requires ongoing medical support and daily care, the costs can quickly become exorbitant. A special needs trust can allow them some financial security while also making them eligible for benefits like SSI and Medicaid.
  • Reduce estate size: By using yearly gift exemptions, a person may be able to add annual amounts to a special needs trust without incurring a gift tax. This reduction in estate size for the benefactor or grantor can have significant tax implications and potential benefits while they are living and at the time of death. There is no estate tax in Arizona that would affect estates with a monetary value lower than $11,580,000.

Working for your loved one’s future

If you’d like to provide for a family member with special needs, contact an attorney with in-depth knowledge of special needs trusts to see your options for making a plan for their future.