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Understanding when a special needs trust is warranted

If you have a loved one who has special needs or is disabled, it's natural that you might want to provide for him or her as long as possible. This is especially true if that loved one is one of your children. For parents of disabled or special needs children, the question of life-long support can be a stressful one, and balancing all of the options to provide the best possible benefits can seem impossible.

These considerations are critical to the estate planning process. If you have the ability, you will likely want to leave some amount of assets to your dependent. Because a special needs or disabled person can't always manage those assets themselves, leaving an inheritance in the form of a trust often makes sense. But there are reasons to create a special needs trust other than the need to put someone else in charge of assets.

One major reason many people choose to create special needs trusts is that the legal structure of the trust can help the disabled individual maintain government benefits. Someone who is disabled might have access to benefits such as disability or Medicaid. Those benefits are often based both on the person's physical or mental status and on one's income. If you leave the individual funds outside of a trust, those funds count toward income received and could mean the person loses access to benefits.

Most assistance programs take certain types of trusts as an exemption with regard to income, but limits on exemptions might exist. Working with an estate planning professional helps you understand how to leave assets for the care of your family member without mitigating positive benefits from other sectors.

Source: FindLaw, "Special Needs Trusts FAQ's," accessed Jan. 08, 2016

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