If you are the parent or guardian of a child with special needs, you may be questioning the best way to support their life going forward. You may be conscious of the fact that owning too much wealth directly could disqualify them from important government programs, which is why many people in this situation consider special needs trusts. Working with an estate planning attorney can help you to determine which type of special needs trust is most applicable to your situation.
The first of these is known as a third party trust, which is funded with someone else’s money solely for the needs of that child but will never be in the child’s direct name.
When the parents are creators of that trust pass away, the funds then go to someone other than the child for the management of that child or adult’s needs. A first party trust, however, is created with the assets owned by the individual to shelter inherited or earned income, so as not to exceed Medicaid income and asset limits.
Distributions from that trust must be approved directly by the trustee of the trust and any assets still inside the trust at the time that the individual recipient passes away, could be claimed by Medicaid.
Special needs trust cannot be used for certain basic expenses that might also be covered by government programs, such as medical expenses, housing expenses from SSI or the Supplemental Nutrition Assistance Program. Sit down with a knowledgeable estate planning attorney to discuss the structure of a special needs trust. Working with a Michigan estate planning lawyer is strongly recommended to help you create a customized and effective plan.