If you have a Michigan loved one with special needs, it is important to plan for their future. One of the best ways to do so is by creating a special needs trust and naming them as a beneficiary.
Understanding a special needs trust
This is a type of trust created specifically for the benefit of a person with disabilities. It aims to provide financial support for the individual without jeopardizing their eligibility for government benefits.
Special needs trusts are categorized based on how they are created and funded. If the person with special needs creates their trust and funds it using their own assets, it is called a first-party trust. However, if someone else, like a parent or sibling, creates a trust for the benefit of their disabled loved one, it is referred to as a third-party trust.
How the trust helps a person with a disability get government benefits
A special needs trust protects government benefits by ensuring that the assets in the trust are not counted as resources when determining eligibility for SSDI and SSI. This is because, when you create this trust, the trust is given the legal title to the assets. This means that, even though the beneficiary has a right to use the trust assets for their benefit, they do not technically own those assets.
Another way is by allowing the trustee to pay for expenses that the person with a disability would have paid themselves. For example, if the beneficiary receives government health insurance, the trustee can use trust funds to pay for dental or vision care not covered by that insurance.
A disability can be very expensive, and sometimes, you may not have enough resources to cover every need of your loved one. So, creating a special needs trust can help you provide what you can for your loved ones while still allowing them to be eligible for government benefits.