Many people are unaware that disabled people are restricted by law in the amount of assets they are permitted to own. If a disabled person acquires too many assets, whether by their own work, by marriage, or some other way, they will lose their disability payments. This sounds reasonable, but in reality, SSDI payments for most people are simply not enough to cover both living expenses and their part of any medical care they may require. The creation of a special needs trust can help your disabled loved one stay on their feet, especially if they are your primary heir or sole heir to your estate upon your passing.

Renton Estate Planning Attorney

A special needs trust sets up a source of income for your disabled loved one that they can legally draw on, and retain their SSDI benefits. In order for a trust to

count as an asset under Medicaid, it must be (1) set up by the disabled person; and (2) they must have the right to draw from it whenever they wish. Special needs trusts are generally set up by the parent or someone who is not the disabled person themselves, meaning that such a trust is not counted toward the SSDI asset limit. In theory, a trust can be ‘self-settled,’ meaning it is funded with the disabled person’s own assets, and administered by another, but most trusts are not.

Another Type of Special Needs Trust

The other type of special needs trust is called a third-party settled trust, which is fairly self-explanatory. The trust is funded with the third party’s assets – so, a trust that you as a parent create for your child, with your assets, would qualify under this category. Third-party settled trusts also have the advantage of having a somewhat simpler tax burden than a self-settled trust would. Thus, if you elect to fund a special needs trust in your will, it would not be treated as a grantor trust, but rather as taxable under 26 U.S.C. 641, which is the standard trust taxation statute.

We Are Here To Help

Washington state law is somewhat nonspecific with regard to special needs trusts, so while it is possible to know what you want for your disabled loved one, it is often a good idea to engage an attorney to help with the proverbial nuts and bolts. Renton estate planning lawyer Dan Kellogg can sit down with you and help draft a trust that will safeguard assets for your family member, and safeguard your peace of mind for your own sake. Call the office today at 425-227-8700 to set up an appointment.