A testamentary trust is established through a person’s will and comes into effect upon their death. This type of trust is particularly beneficial for individuals with special needs, as it allows for the management of assets intended to support them without jeopardizing their eligibility for government benefits. Below are three practical examples of testamentary trusts tailored for special needs beneficiaries.
Parents of a child with disabilities may want to ensure that their child is financially supported after their passing. A testamentary trust can be structured to provide long-term care and financial resources.
In this example, the parents establish a trust funded by their estate to care for their disabled child, Sarah, who is unable to manage finances independently.
The trust is set up to provide for Sarah’s medical expenses, housing, and education. It includes provisions that allow the trustee to distribute funds for Sarah’s needs while maintaining her eligibility for Medicaid and Supplemental Security Income (SSI) by adhering to the asset limits.
The trustee can use the trust funds for special therapies, educational programs, and supervised living arrangements. The will specifies that funds should be used judiciously to ensure Sarah’s quality of life without risking her government assistance.
An individual with intellectual disabilities may require ongoing financial support well into adulthood. A testamentary trust can provide a structured approach to ensure their needs are met while preserving their access to government benefits.
In this scenario, John, a 35-year-old man with intellectual disabilities, is the beneficiary of a testamentary trust established by his father. The trust is designed to provide income for John, allowing him to live in a supportive environment while ensuring he does not lose his eligibility for benefits.
The trust specifies that funds can be used for John’s living expenses, including rent for a group home, personal care assistants, and recreational activities. However, distributions for basic living expenses are limited to avoid exceeding the asset thresholds that would affect John’s government aid.
Families with multiple children, some of whom have special needs, may want to create a testamentary trust that addresses the varying needs of each child while ensuring fair treatment.
In this case, Emily and David have three children: Lucy, who has autism, and two neurotypical siblings. The parents set up a testamentary trust that allocates funds specifically for Lucy’s needs while also providing for her siblings.
The will establishes a separate account within the trust for Lucy, which funds therapeutic services, educational support, and any special equipment she may require. Additionally, the trust contains provisions that allow for equal distributions to the siblings, ensuring they benefit from the estate without compromising Lucy’s access to special services.
By creating testamentary trusts tailored to special needs beneficiaries, families can ensure that their loved ones receive the necessary support while protecting their eligibility for vital government assistance.