Planning for the future of a loved one with special needs requires careful consideration, especially when it comes to financial security. A Special Needs Trust (SNT) is an essential estate planning tool designed to provide for individuals with disabilities while preserving their eligibility for government benefits such as Supplemental Security Income (SSI) and Medicaid (AHCCCS), and the Arizona Long-Term Care System (ALTCS).
How Does a Special Needs Trust Work?
A Special Needs Trust is a legal arrangement that holds assets for the benefit of a person with a disability. These assets can be used to pay for expenses that enhance the individual’s quality of life, such as housing, transportation, education, and medical care not covered by public assistance programs. Because the trust owns the assets rather than the beneficiary, the funds do not count toward income or asset limits for means-tested benefits.
Types of Special Needs Trusts
There are two main types of Special Needs Trusts:
- First-Party Special Needs Trust – Funded with assets belonging to the individual with a disability, such as an inheritance, personal injury settlement, or savings. This type of trust must include a Medicaid payback provision, meaning that after the beneficiary’s passing, any remaining funds may be used to reimburse the state for Medicaid benefits received.
- Third-Party Special Needs Trust – Established and funded by someone other than the beneficiary, usually a parent, grandparent, or another family member. This trust is often used as part of an estate plan and does not require a Medicaid payback provision, allowing remaining assets to pass to other family members or charities.
Why is a Special Needs Trust Important?
Without proper planning, leaving assets directly to a loved one with special needs can inadvertently disqualify them from essential government benefits. A Special Needs Trust allows families to provide financial support while ensuring the individual remains eligible for assistance programs. Additionally, the trust is managed by a designated trustee who oversees distributions to meet the beneficiary’s needs.
Setting Up a Special Needs Trust in Arizona
Creating a Special Needs Trust requires careful planning to ensure it complies with Arizona and federal laws. It is crucial to work with an experienced estate planning attorney to draft a trust that meets your loved one’s unique needs and long-term goals. At Windrose Law Center, we guide families through the process to help secure a stable financial future for their loved ones with special needs.
If you have questions about Special Needs Trusts or need assistance setting one up, contact our office today to schedule a free consultation.