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Special needs trust: a potentially invaluable legal instrument

The parameters of a so-called "special needs" trust are somewhat implicit in its terms. That is, this highly specialized estate planning instrument helps provide for the singular needs of a family member who needs some assistance.

That need for assistance is most commonly seen in the realm of finances or daily care, with the beneficiary of a special needs trust most often requiring help with money matters or assistance targeted toward alleviating the effects of a limiting disability.

Of course, that can certainly be promoted through a will inheritance, direct cash transfers and other forms of wealth distribution, but families who are acting out of love often employ their hearts more than their heads.

The potential result is this: Notwithstanding best intentions, assets transferred to persons with special needs can inadvertently jeopardize their eligibility for means-tested government assistance programs such as Medicaid and Supplemental Security Income.

As noted by a national provider of legal information, that is where a special needs trust comes in. This trust vehicle commands singular utility for its ability to both disburse assets to a beneficiary and simultaneously preserve that person's eligibility status for government assistance.

The power of a special needs trust owes to its legal characterization as a planning tool pursuant to which assets are not owned outright by a beneficiary but, rather, distributed on that person's behalf by a trustee. Given that status, benefit managers do not construe trust assets as income that could potentially preclude a disabled beneficiary from receiving government assistance.

Although special needs trusts can be of tremendous value in certain circumstances, they can also be a bit tricky to set up and administer, thus prompting many people interested in this planning tool to seek assistance from a proven estate planning attorney with a strong background in crafting trusts.

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