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If you have a child/grand child with special needs – then you can leave them that money in a special needs trust. Our New York special needs trust lawyers can help you leave your kids money in a special needs trust – while ensuring the child still qualifies for government benefits like SSI and medicaid. The reasoning behind this is simple. Prior to these trusts, parent would disinherit their kids – because otherwise the kids would benefits. With special needs trust, a child can use the money for things like clothing, education, hobbies, dietary needs, tickets for events, health care, household goods, personal care products, and more.
These trusts, however, have pitfalls. That’s why you need a New York special needs trust law firm who understands the complexities of them. Payments to a child can reduce their SSI dollar payments. Trustees of such trusts must make payments directly to the providers of goods/services, to avoid such a penalty. Preserving SSI benefits is important in order to continue eligibility for medicaid. If SSI is lost, the recipient also loses medicaid benefits.
Another interesting to remember, is that distributions from the trust should be “in kind,” rather than cash. The trust can own items, like furniture, and allow the beneficiary handicapped child to use the items. We can draft a special needs trust, that makes it so that payments are only allowed for any benefits over what the government provides, for the foreseeable future. It can be setup in a manner which makes it so that the child has no control, or access, to any portion of the trust.
There are two types of special need trusts. First party and third party trusts. The first party is setup by a parent or guardian, using the child’s own money. This money can be from earnings, inheritance, or personal injury awards. These trusts require a “payback,” provision which means that upon death of the child, the trust has to pay back the state government for any benefits received. That means the government is letting you use the money for your special needs, but whatever was not needed goes back towards basic requires. These trusts mandate annual reporting and have accounting requirements.
Third party trusts are setup by a third party, like a parent, using their own money. There is no “payback,” provision here. This is because the child’s own money wasn’t the money that funded the trust – and the parent has no obligation to leave any assets to the child. On death of the child, the balance of the trust is paid to the disabled child’s children.
With major advances in medical care, many disabled children are surviving longer and longer. In order to solve this, parents are leaving a disproportionate amount of their estate to their child. This can result in complex financial arrangements. You need to speak an estate planning attorney who can help you create a financial outcome – that helps you, your children, and your disabled children – all the same time.