For people who want to ensure that their beneficiary with a disability will be taken care of financially, a stand-alone special needs trust is a vital tool. It allows you to provide them with supplemental funds that are not covered by their existing benefits. It also ensures that the funds are used for the beneficiary.
In this blog post, we’ll take a closer look at this kind of trust, the reasons for creating one, and how to go about working with an attorney to meet the needs of your specific situation.
What Is a Stand-alone Special Needs Trust?
A stand-alone special needs trust (also referred to as an SNT) is a trust that is specifically created to provide financial support to a beneficiary with a disability without affecting their eligibility for government assistance. It allows the beneficiary to access supplemental funds that are not covered by their existing benefits while protecting their assets.
There are a number of reasons why lawyer clients may choose to create a stand-alone special needs trust. It can help them protect the owner’s assets, ensure that their beneficiary receives the financial support they need, and provide peace of mind knowing that their beneficiary will be taken care of in the event of their death or other significant life events.
The Advantages of a Stand-alone Special Needs Trust
There are many reasons that a trustee may want to create a stand-alone special needs trust. Here are the most common benefits attorneys will tell you why it’s important to create and manage one.
Financial Security
An SNT can be established with a variety of funding sources, including gifts or bequests from family members, personal injury settlements, or funds from the beneficiary’s own savings or investments. This means that the trust can remain viable for long periods, providing ongoing financial security.
All funds in the trust are used exclusively for the benefit of the beneficiary, allowing them to have access to additional funds without affecting their eligibility for government benefits. This provides an extra financial cushion in case of unexpected expenses or to supplement their basic needs.
Supplemental Care
Although government benefits programs are designed to meet basic needs, they may not provide sufficient coverage for all the additional care and services that someone with special needs may require. A stand-alone special needs trust allows trustees to supplement these benefits with additional funds to cover things like medical and dental care, therapy, assistive technology, home modifications, and more.
Examples of additional care and services that can be funded by an SNT include medical care not covered by insurance or government benefits, specialized therapeutic services, education and training, recreational activities, travel, purchasing medical equipment or other assistive technology items, transportation costs, and home modifications.
Flexibility
If trustees want to customize their plan according to the needs of the beneficiary, a lawyer can structure the trust in whatever way they choose, allowing the trustee to make changes or updates as needed.
Some examples of how an SNT provides flexibility include setting up various subaccounts within the trust for different purposes such as medical expenses or recreational activities; allowing the trustee to name successor trustees; and allowing for distributions in any form the trustee chooses such as cash payments, direct deposits to accounts, or by providing goods or services directly to the beneficiary.
Steps to Creating a Stand-alone Special Needs Trust
Creating a stand-alone special needs trust can be a complex process, but with the right guidance and advice, your lawyer can ensure that the process goes smoothly and is done correctly.
Let’s dive into the steps needed for creating a stand-alone special needs trust.
Step 1: Assess the Situation
Before creating a stand-alone special needs trust, individuals should evaluate the beneficiary’s circumstances to determine if it is necessary to create one. They should consider the beneficiary’s financial needs and how much assistance they will require.
Step 2: Determine the Type of Trust
A qualified attorney can help trustees decide what type of trust is best for their situation. This could include an irrevocable or a revocable trust, a stand-alone trust, a testamentary trust, or other options.
Step 3: Secure Funding
Before establishing the trust, the trustee will need to secure funding for the trust. They may choose to contribute their own funds, acquire gifts from relatives, sell assets, or find other sources of funding.
Step 4: Select a Trustee
Next, individuals will need to work with their attorney to select an appropriate trustee(s) who can manage the trust and ensure that it is used for the benefit of the beneficiary. The word “trust” is essential here; the trustee should be someone who genuinely cares about the well-being of the beneficiary.
Step 5: Draft the Trust Agreement
The lawyer will then draft a trust agreement that outlines how the trust will be managed and how funds can be accessed. The agreement typically includes provisions regarding when and how distributions can be made from the trust.
Step 6: Sign and Fund the Trust
Once the trust agreement has been drafted, clients and their attorneys will sign and fund the trust with contributions from themselves or other sources of funding.
Step 7: Monitor the Trust
Last but definitely not least, trust clients need to oversee the trust on an ongoing basis to ensure that it is being managed properly and providing the desired benefits for the beneficiary. This includes making certain that distributions from the trust are being used for appropriate purposes and recorded properly.
Find Help with Auld Brothers Law
Creating a stand-alone special needs trust can be a complex process, but with the right guidance and advice, the right attorney can make sure that the entire process goes smoothly and is done accurately.
The Auld Brothers Law firm specializes in a wide range of trusts including stand-alone special needs trusts. Our team of experts can provide guidance every step of the way as well as carefully monitor the trusts over time and manage them properly.
At Auld Brothers, we’re here to protect you and your loved ones’ interests. With careful planning and management from our staff, you can rest assured knowing that your and your beneficiary’s financial future is secure, safe, and legal.