REASONS FOR A SPECIAL NEEDS TRUST IN PHOENIX, ARIZONA

If you have a child with a disability, you should explore the idea of creating a special needs trust (“SNT”) with the help of a Phoenix estate planning attorney. An SNT is a trust that is designed to protect and hold assets for a disabled beneficiary. Through an SNT, you can provide for such items as physical therapy, medical treatment, education, entertainment, furniture, and travel. The main rule for an SNT is that the beneficiary must have no control over the trust. Instead, a designated trustee must manage the trust.

Below are some of the reasons to create a special needs trust in Phoenix.

1. Maintain eligibility for public benefits while providing for your child

To be eligible for certain public benefits, like Social Security Income or Medicaid, individuals must fall below set income limits. If you gift money or property to an individual, the gift will count towards the income limits and may affect their ability to receive critical public benefits. However, a special needs trust allows you to provide for the beneficiary without impacting their eligibility to receive public benefits and putting them at risk.

2. Ensure that assets are used as you intend

The designated trustee must distribute the assets as outlined in the special needs trust; they cannot act in violation of the trust document. Even after your death, the trustee will continue to serve and must follow your wishes as written in the SNT. It is essential to have an SNT if the disabled individual is unable to handle finances independently. Even if your child is only slightly disabled, an SNT can help prevent them from making reckless purchases and protect them from dangerous individuals looking to prey on vulnerable individuals.

3. Allow other individuals to contribute to the care for your child

A special needs trust is a tool that allows others to help provide for the disabled beneficiary. Multiple individuals can contribute to the same SNT. By having others gift through an SNT, you can have control over how the funds are used and ensure that your child’s eligibility for public benefits is not put at risk. Additionally, relatives and family friends can make contributions to an SNT up to specific monetary limits without triggering the gift tax or generation-skipping tax.

4. Protect the assets from creditors

Creditors cannot touch property in a special needs trust. For example, if the disabled individual is sued in a personal injury action, a judgment creditor cannot seize the property that is in the SNT. The SNT is also protected from creditors of the settlor (the person who created the trust).

5. Maximize the funds from a personal injury settlement

If the disabled child won a large settlement in a personal injury action, it is a good idea to have the payout directed to a special needs trust. The child will be able to qualify for public benefits and be able to receive the payout through the SNT.

6. Protect assets throughout a divorce

If the beneficiary ever goes through a divorce, having a special needs trust can help protect their assets. An SNT can be created as part of the divorce agreement to receive court order support payments. The SNT will prevent any support payments from affecting the disabled individual’s eligibility for public benefits.

7. Preserve family wealth

As with other types of trusts, a special needs trust can work to preserve family wealth. It is a tool that allows you to provide for your children while at the same time placing limits on how the property is used. Many times, parents believe that they can leave everything to a brother or sister of the disabled child. This is not the best option. No matter how well-intentioned the sibling, they may not be able to keep the property safe through such events as divorce, death, or bankruptcy.

Your Phoenix Estate Planning Attorney

If you are interested in creating a special needs trust, you should reach out to an experienced Phoenix estate planning attorney. The rules surrounding special need trusts are complex, so it is crucial to have an expert on your side. Nicole Pavlik is a trusted estate planning attorney in Phoenix, Arizona. Call Nicole Pavlik Law Firm today at (602) 635-6176 for a free consultation.