Caring for those with developmental disabilities can demand an enormous amount of time, energy, and love. If you are responsible for a person who may benefit from a special needs trust, then you should speak to an estate planning lawyer. The more you learn about special needs trusts the more knowledgeable you will be about estate planning in Arkansas.
The Different Categories of Special Needs Trusts
A special needs trust is one of the most effective estate planning tools available to prospective clients. The majority of trusts are composed of three parties: the settlor, the trustee, and the beneficiaries. A settlor creates the trust, the trustee manages the trust, and the beneficiaries benefit from the trust.
A special needs trust is a unique type of trust which benefits individuals who suffer permanent or temporary disability. Oftentimes these trusts are used to enable the beneficiary to keep Medicare and Medicaid benefits. Two of the most common types of trusts are first-party trusts and third-party trusts.
A friend or relative may create a third-party trust while their loved one is living or by including a provision in their will. Third-party trusts may receive assets from many unique sources. The settlor may decide how trust assets should be divided if the beneficiary dies.
Third-party trusts do not necessitate payback provisions. If a beneficiary under a third-party trust wants to seek governmental benefits, then the assets in the trust are not counted against the beneficiary. Federal laws, state laws, and administrative regulations are applicable to the establishment of a special needs trust.
Many individuals receive assets from insurance settlements, civil lawsuit settlements, and inheritances. These funds can be placed in a first-party trust to enable the beneficiary to still qualify for Medicaid and Medicare. The trustee manages the trust corpus, and the beneficiary does not have access to the assets in the trust.
First-party trusts require payback provisions. Essentially, the assets which remain in the trust after the death of the beneficiary have to be given to the state to reimburse it for the public benefits the decedent received. Learning more about first-party trusts will help you ascertain whether you should establish a first-party trust.
Special Needs Trusts and Funding
Special needs trusts are intended to improve the quality of life of the beneficiary. The assets in the trust cannot be used for shelter or food because then the assets would be categorized as income. In this case, the beneficiary would not qualify for Supplemental Security Income (SSI) or Medicaid.
The following are some examples of expenses which may be paid for by the assets in a special needs trust:
- Business loans
- Nursing care
- Medical equipment
If you need to understand more details about special needs trust, then it is advisable to start with the Arkansas probate code. The provisions contained in the state statutes are interpreted by courts through case law. An experienced estate planning attorney can help you understand which statutory provisions may be relevant to special needs trusts.