Special Needs Trust Lawyer Lancaster

Planning for the long-term care of a loved one with special needs requires careful consideration and the right legal guidance. At Brandywine Estate & Probate Lawyer, we help families in Lancaster create special needs trusts that protect assets while preserving eligibility for essential benefits. Our knowledgeable special needs trust lawyer will work closely with you to craft a plan that secures your loved one’s future. Call 717-219-3839 today for a free consultation and let us help you take this important step with confidence.

Understanding the Various Types of Special Needs Trusts and Their Advantages

When planning for the future of a loved one with disabilities, it’s important to think about how to provide financial support without jeopardizing their eligibility for government benefits. Special needs trusts (SNTs) are powerful tools that can help ensure that individuals with disabilities can access resources without losing critical assistance such as Medicaid and Supplemental Security Income (SSI). These trusts are designed to provide financial support while protecting eligibility for these benefits, but not all special needs trusts are created the same.

Understanding the different types of special needs trusts and their specific benefits can help you make informed decisions for your loved one’s future.

What is a Special Needs Trust?

A special needs trust is a legal arrangement where a trustee manages assets for a beneficiary who has a disability. The key aspect of an SNT is that it allows the beneficiary to receive financial support while maintaining eligibility for public assistance programs like Medicaid or SSI. Without such a trust, receiving a lump sum or direct support might disqualify the individual from these vital benefits.

There are several different types of special needs trusts, each suited to different circumstances. Knowing which type of trust is best for your loved one depends on various factors, including their financial situation and their current or future eligibility for government programs.

First-Party Special Needs Trust

A first-party special needs trust is funded with the beneficiary’s own assets. This might occur, for example, if a person with disabilities receives a personal injury settlement or an inheritance. The trust is designed to keep those assets from affecting the beneficiary’s eligibility for public assistance programs.

How it works: In a first-party SNT, the trust is funded with the beneficiary’s own funds. The trustee manages the assets, ensuring they are used for the beneficiary’s benefit, but not in ways that would disqualify them from Medicaid or SSI.
Key benefit: The main advantage of a first-party special needs trust is that it can protect government benefits while allowing the beneficiary to use the trust funds for things like medical care, education, or personal expenses that are not covered by Medicaid or SSI.
Considerations: One key feature of a first-party SNT is that any remaining funds in the trust at the beneficiary’s death must be used to reimburse the state for Medicaid services provided to the beneficiary. This is known as the Medicaid payback provision.

Third-Party Special Needs Trust

A third-party special needs trust is funded by someone other than the beneficiary, such as a parent, grandparent, or other relative. This type of trust is often used in estate planning for individuals with disabilities. It allows the person creating the trust (the “grantor”) to leave assets to the individual with a disability without jeopardizing their government benefits.

How it works: The third-party trust is created with assets that belong to the grantor. The trust’s beneficiary (the individual with a disability) does not have access to the assets directly. Instead, a trustee manages the assets and makes distributions on the beneficiary’s behalf, for their benefit.
Key benefit: The primary benefit of a third-party special needs trust is that it allows the beneficiary to receive gifts or inheritances without affecting their eligibility for government benefits. Unlike a first-party trust, there is no Medicaid payback provision, meaning any remaining funds in the trust after the beneficiary’s death can be distributed to other family members or beneficiaries.
Considerations: A third-party special needs trust offers more flexibility in terms of what can be done with the remaining assets after the beneficiary’s death, and it can be structured to fit the grantor’s specific intentions. However, it requires careful planning to ensure that the trust meets the legal requirements.

Pooled Trust

A pooled trust is a special needs trust that is managed by a non-profit organization. Funds from multiple individuals with disabilities are pooled together for investment purposes, but each beneficiary has their own separate account. These types of trusts are often used by people who may not have enough assets to justify the cost of setting up a standalone trust.

How it works: Pooled trusts are managed by organizations that specialize in managing assets for individuals with special needs. Each beneficiary’s funds are placed into a separate account, but the investments and management are pooled together for efficiency and lower administrative costs.
Key benefit: Pooled trusts are often more affordable to establish and manage than individual trusts, making them a great option for families with limited financial resources. They are also flexible and can accommodate individuals with a variety of needs.
Considerations: A pooled trust may not be ideal for individuals who need complete control over how their funds are used. The organization managing the pooled trust will have its own rules and guidelines, which may limit some decisions about how funds are spent. However, pooled trusts can be a good solution for many families with special needs beneficiaries who require professional oversight and management of their assets.

ABLE Accounts

While not technically a type of trust, an ABLE (Achieving a Better Life Experience) account is another tool for individuals with disabilities to save money without losing eligibility for government benefits. ABLE accounts are designed to work similarly to a special needs trust but with fewer restrictions and less complexity.

How it works: ABLE accounts allow individuals with disabilities to set aside up to $15,000 annually in a tax-advantaged account. Funds in the account can be used for qualified disability expenses, including education, transportation, and healthcare costs, without affecting eligibility for Medicaid and SSI.
Key benefit: The primary advantage of an ABLE account is its simplicity. It allows people with disabilities to save money in an account that is easier to set up and manage than a special needs trust.
Considerations: The main limitation of ABLE accounts is the annual contribution limit, which is significantly lower than what can be contributed to a trust. Additionally, ABLE accounts may not be suitable for people who require more extensive management of their assets or those with large sums of money to set aside.

Supplemental Needs Trust

A supplemental needs trust is a type of special needs trust that is specifically focused on providing funds for the beneficiary’s non-essential, but beneficial, needs. These can include items and services not covered by government programs, such as vacations, entertainment, personal items, or new technology.

How it works: A supplemental needs trust is generally a first- or third-party trust designed to improve the beneficiary’s quality of life. The funds from the trust can be used for things that enhance the beneficiary’s lifestyle but do not interfere with their eligibility for public benefits.
Key benefit: The key benefit of a supplemental needs trust is that it allows individuals with disabilities to access additional funds to improve their overall quality of life while preserving their eligibility for government programs.
Considerations: Similar to other types of special needs trusts, it’s important to ensure that the trust is set up properly to avoid any unintended consequences that could affect the beneficiary’s eligibility for Medicaid or SSI.

Selecting the right special needs trust for your loved one is crucial to ensuring that they can receive financial support without sacrificing their eligibility for essential government programs. The type of trust you choose will depend on various factors, including the source of the funds and the individual’s long-term needs.

Secure Your Loved One’s Future with a Special Needs Trust Attorney

Planning ahead can make all the difference in ensuring your loved one with special needs is cared for and financially protected. At Brandywine Estate & Probate Lawyer, we are committed to helping families in Lancaster create comprehensive special needs trusts that safeguard assets without compromising essential benefits. Our dedicated special needs trust attorney will guide you through every step of the process with care and attention to detail. Call us today at 717-219-3839 for a free consultation and take the first step toward peace of mind for you and your family.