New York Estate Planning & Elder Law Blog
Special needs trusts perform the valuable role of keeping a person eligible for government benefits like Medicaid and Supplemental Security Income (SSI) while also paying for services in addition to what the government can offer. If you make the decision to establish a special needs trust for a loved one, many assets will likely be placed in the trust only after you pass away. To transfer these assets, there are several commonly used methods including living trusts, will, and other types of beneficiary designations. This article reviews several of the estate planning tools most commonly used to transfer property to a special needs trust.
# 1 – Beneficiary
Many different types of financial accounts including retirement plans like 401(ks) and IRAs, life insurance, and securities allow a person to assign a beneficiary of the assets. This beneficiary then receives the funds following the owner’s death. By assigning a special needs trust as a beneficiary, it is possible to pass on an asset without subjecting it to probate. Remember, you must list the special needs trust rather than your special needs loved one as the beneficiary. If you list your loved one as a beneficiary, this could end up jeopardizing their receipt of Medicaid or SSI.
# 2 – Revocable Living Trusts
Some people decide to use living trusts to fund special needs trusts. The terms of the living trust state the property that will pass to the special needs trust rather than directly to the beneficiary. One of the most substantial advantages of using a revocable living trust to pass on assets is that trust property is not required to pass through probate, which can both costly and time-consuming. Any property that is not held by the revocable living trust will pass in accordance with a will or probate laws. As a result, it is critical that people who decide to use a living trust to pass on assets also create a will.
# 3 – Wills
The most commonly known estate planning documents, wills can be created to pass on property to a special needs trust. Wills offer great flexibility. While some people decide to create them on their own, other people use the help of an attorney. Wills can also be revised at any time. One of the biggest disadvantages of using wills to transfer property to a special needs trust is that the assets might end up in probate, which can ultimately reduce the assets available to help your loved one. As a result, many people decide to utilize revocable living trusts instead of wills to pass assets to a special needs trust.
Contact an Experienced Estate Planning Lawyer
Trusts are one of the most nuanced areas of estate planning. If you have questions or concerns about the role that a trust can play in your estate plan, it can help substantially to speak with a knowledgeable attorney. Contact the Ettinger Law Firm today to schedule a free case evaluation.