Because it deals with end-of-life and post-life matters, estate planning can be both uncomfortable and easy to put off. In fact, more than half of Americans have not yet created even a basic will. If you have a complex estate, drafting a comprehensive will may only be one step in your estate planning process.
A trust is a fiduciary arrangement that permits a trustee to hold your assets for the benefit of someone else or an entity. If you have a relative who has a disability, you may want to use a special needs trust to provide for him or her after your death. Here are three reasons to include this type of trust in your estate plan.
1. Preserve your loved one’s eligibility for public benefits
If your relative’s disability interferes with his or her ability to work, means-tested public benefits may help cover the costs of housing, food and basic medical care. To be eligible for these benefits, though, your loved one likely must have limited assets. Because a special needs trust does not transfer ownership of assets to your relative, he or she probably retains eligibility for public benefits.
2. Protect your hard-earned wealth
When you form a special needs trust, you designate a trustee to manage it. This person oversees recordkeeping and reporting tasks. He or she may also invest funds inside the trust, ensuring your hard-earned wealth continues to grow over time.
3. Provide your relative with necessary services
The trustee also must approve disbursements from the trust before allowing your relative to use them. When reviewing disbursement requests, the trustee may have the opportunity to explore your loved one’s care needs. If something is missing, the trustee may collaborate with health care professionals, social workers or others to provide necessary services.
While a special needs trust is not right for every estate plan, it may help you cement your legacy. After all, there may be no better way to use your wealth than improving the quality of a relative’s life.