Did you know that in Colorado, your family can set up a trust to support a loved one with disabilities? This type of trust is called a Special Needs Trust and allows family members (yes, multiple) to contribute to one trust. These trusts are established to preserve a disabled person’s eligibility for government benefits (Social Security and Medicaid) while still allowing them to receive financial help from their family.
Typically, to receive government benefits like Medicaid and Supplemental Security Income (SSI), an individual must remain below a certain asset and income level. If a loved one were to provide assets to someone receiving these benefits, they could lose their eligibility. However, funds that are transferred into a special needs trust do not count for government benefit purposes, and thus will not jeopardize their eligibility.
There are two types of special needs trusts in Colorado: self-funded trusts and third-party created trusts. A self-funded trust can be established for any disabled person under 65 years old by their parent, grandparent, or guardian, or even created by the beneficiary himself. These trusts are established with assets belonging to the person with special needs, such as inheritances or personal injury settlements.
A third-party trust is funded by someone other than the beneficiary, and does not include assets they own. A typical example of a third-party trust is a trust created for a disabled child by his parents during their lifetime, to enhance his standard of living while not endangering his eligibility for benefits. A parent could also create a third-party trust by including language in their will, which would then be funded upon the death of the parent. Other family members can add to this trust as well.
Because special needs trusts must comply with federal and Colorado law, it is important to speak with an estate planning attorney to determine if such a trust is right for your family member. Every trust has pros and cons – it’s important that you understand what these are and do not attempt to draft this type of trust on your own. If you want to learn more about Special Needs Trusts, contact Anne McMichael by email ([email protected]) or telephone (303-572-4200) to schedule a reduced-rate consultation.
Source – www.specialneedsanswers.com