If you’re a parent or a grandparent to someone living with special needs, you’re probably aware of how consumed daily life can be with physical care, love, and emotional support – not to mention other forms of enrichment that can strengthen family bonds. When a spare moment finds you, you may find yourself fretting about the child’s future and how they will be able to afford continued care when you’re gone.
A third-party special needs trust attorney in Walnut Creek from Feldman Law Group can help you plan for the future so your loved one will one day be able to comfortably afford housing, education, living allowances, and more without sacrificing their eligibility for government benefits that also provide such amenities in life. We have worked with clients in matters like this for more than 35 years throughout Alameda County, and we’re ready to help you create a course of action that will secure the financial future or your child or grandchild.
Can Creditors Claim Funds Held in This Type of Trust?
Funds and property in this trust are titled to the trust. This means that a beneficiary’s creditors can seek repayment through the trust’s assets or by placing liens on properties titled to the trust.
How Does a Third-Party Special Needs Trust Work?
This type of trust is named because there are generally three parties involved: the grantor, the trustee, and one or more beneficiaries. The trust can be funded with cash, stocks, property, and other assets and are made available for the benefit of the beneficiary. The trust itself holds legal title to these things, however, which avoids income triggers that could otherwise cost a beneficiary their eligibility for government benefits.
The trustee’s role in all of this is to manage the trust’s assets, which can include investing assets or liquidating them to afford the beneficiary’s housing, education, travel, and other qualified uses of the trust. When investments generate income, it benefits the beneficiary without counting as their actual personal income.
What Happens to Leftover Funds?
The beneficiary will eventually pass away, as we all will, but what happens to the remaining assets and properties held by their third-party special needs trust? If the trustee or trust itself names a successor beneficiary – such as a child or sibling of the deceased beneficiary – the remaining assets can exist for their benefit.
Because the trust is not part of the beneficiary’s estate, it cannot be claimed by creditors or taxed as estate property upon death. Another important consideration is that this type of trust doesn’t permit the government to seek repayment for government benefits the deceased used during life.