What exactly is a testamentary special needs trust? By the end of this blog, you will know the answer to this question and you will know if a testamentary special needs trust is right for you.
So, a special needs trust is a trust created in your will. The trust that's created in your will is for someone with a defined special need. The defined special need is someone who has a disability that's actually legally recognized. Therefore, it is not someone who you might consider special just because they act a certain way, but this actually has to be a diagnosed disability.
If you have someone with a diagnosed disability, he or she may be on government benefits and therefore if you leave them assets, if you leave them a distribution in a will as an actual beneficiary, you could be jeopardizing that governmental aid to them. One way to get around that is, within the will to create a provision for the creation of a special needs trust. Therefore, when you pass away, the executor will create a special needs trust for that individual and any distribution from your estate to that person will go into a special needs trust. The great thing about that is, the distribution is not counted as income towards your special needs loved one and therefore, they can still maintain their disability or their government benefits. This is the perfect gifting tool.
Why should you do a testamentary trust as opposed to doing it inter vivos or while you're alive? Inter vivos is our special word for meaning for some people it can be expensive and for other people they might not have the means to fund the trust or put something in the trust until after they pass away.
For some people, it could be a life insurance policy they want to leave for the special needs loved one or for the person with special needs and therefore they want the trust to be created in the will. The life insurance can be paid into that trust along with other distributions you want to make to that special needs person. Therefore, they get to enjoy all the things you want to give to them and still maintain their government benefits.
This is real gifting. Megone Trewick, our Lead Estate Planning, Probate and Guardianship Attorney is ready and waiting to help you today.
Call our office at: 281-810-9760 to begin preparing for your loved ones’ futures today!