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Why You Need Special Needs Language in A Last Will and Testament and Special Needs Trusts

NAPERVILLE AND OSWEGO ESTATE PLANNING BY ROBERTSON LEGAL GROUP LLC ESTATE PLANNING ATTORNEYS

When making plans for your family and your estate there are many facets to consider to ensure that your loved ones are protected after you are gone. One of the most sensitive and complex areas of estate planning is making sure that your estate plan adequately protects a loved one that is currently disabled or who may become disabled later in life.

The reason that aspects of an estate plan can become complicated is because disabled adult beneficiaries who would otherwise be eligible for benefits from Social Security or Medicaid may be disqualified due to an improperly structured estate plan.

NAPERVILLE, BOLINGBROOK, AND OSWEGO REVOCABLE LIVING TRUST ATTORNEYS

Options When Your Estate Plan Has A Will Or A Revocable Living Trust

If you have chosen to write a Will and you want to make sure to protect your potentially disabled family members then you can execute a Will with a section that explicitly states that if necessary that the share of the estate that you would like to leave to the beneficiary who is either currently disabled or who may become disabled in future is then transferred to a special needs trust.

Without this language there would be no transfer and without the transfer to the special needs trust, then that family member would lose the opportunity to take part in the government programs.

So for example you may leave your disabled family member sixty-five thousand dollars ($65,000.00) and if you do not put in the language in your Will about transferring the funds to the special needs trust then your beneficiary will have the $65,000.00 but no Social Security, no Medicaid, and possibly no other government benefits that they could be getting due to having lower income. This could be harmful and not protect your love ones as you would have hoped because the $65,000.00 will probably not last that long and therefore, the beneficiary is disqualified from benefits without funding from government programs.

You can also put the same language in a revocable living trust to accomplish the same ends. A revocable living trust holds property in the trust for the benefit of the beneficiary but it gives the trust maker the ability to move assets in and out of the trust during their lifetime.

Now that you have decided that this is a protection that you want to add to your Living Will or Revocable Living Trust now you have to choose between the different types of special needs trusts.

OSWEGO, PLAINFIELD, AND NAPERVILLE SPECIAL NEEDS LAWYERS

Types of Special Needs Trusts

Special Needs Trusts are controlled by United States and Illinois statute. There are two Special Needs Trusts to consider: First-Party Special Needs Trust and Pooled Special Needs Trust.

The First- Party Special Needs Trust is governed under 42 U.S.C. §1396(p)(d)(4)(a).

Basics Of First Party Special Needs Trusts

  • Beneficiary must be under the age of 65 when the trust is funded, after the beneficiary reaches the age of 65 any new assets are valued at “fair market value.”
  • After the beneficiary dies what remains in the trust must be paid to the state.
  • Can only be set up by parent, grandparent, legal guardian or the court.
  • Anyone can manage the trust.

Pooled Special Needs Trust is governed under 42 U.S.C. §1396(p)(d)(4)(C)

Basics Of Pooled Special Needs Trusts

  • Beneficiary must be under the age of 65 when the trust is funded, after the beneficiary reaches the age of 65 any new assets are valued at “fair market value.”- This is a rule established by the state of Illinois after 2012.
  • After the beneficiary dies what remains in the trust must be paid to the state.
  • Can be set up by anyone.
  • The manager of the trust must be a non-profit organization.
  • This trust allows for other disabled persons to sign an agreement to become a beneficiary under the trust and the each beneficiary has their own account within the trust but the assets are pooled together with the other beneficiaries for investment purposes.

Extra Considerations For Both Types of Special Needs Trusts

  • Illinois does not allow disbursements to benefit minor children of a parent who is a beneficiary under the trust.
  • The trust doesn’t need to be paid back to the state if the reason the trust was set up was because of a personal injury settlement from a nursing home injury. 210 ILCS 45/3-605.
  • These trusts cannot be used to avoid creditors.
  • Both trusts are irrevocable trusts.
  • The disbursements from these trusts must be for the sole benefit of the beneficiary but they cannot support the beneficiary. Therefore, the trustee must be very careful when they make disbursements because they may be misusing the funds.
  • The trustee cannot make disbursements directly to the Beneficiary or to an account that is held in the Beneficiary’s identity. The funds can be used to pay third-parties and individuals as reimbursement.
    • So for example the trustee could pay someone directly who comes to take care of the beneficiary, real estate taxes, buying clothes for the beneficiary.

EXPERIENCED AURORA AND OSWEGO SPECIAL NEEDS TRUST ATTORNEYS

If you have questions regarding estate planning or regarding setting up a special needs trust and you are in Naperville, Plainfield, Oswego, Aurora, Joliet, Bolingbrook, and Romeoville a knowledgeable estate planning attorney at Robertson Legal Group LLC can help. To schedule a FREE consultation call our South Naperville Office at 630-780-1034 or fill out an online contact form.

Sources

42 U.S.C. §1396(p)(d)(4)(a).

42 U.S.C. §1396(p)(d)(4)(C)

Nursing Home Act-210 ILCS 45/3-605.

305 ILCS 5/3-1.2

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