Caring for a loved one with special needs may be a lifetime responsibility. Parents and other family members may need to continue to provide daily guidance and financial support for someone with special needs even after they become an adult. Individuals with disabling medical conditions may never be able to live a fully independent life because of their medical challenges.
Those who love someone with a disabling medical condition often aspire to provide them with support for as long as is necessary. Often, support needs will persist even after family members die. The creation of a special needs trust is one of the most effective ways to provide ongoing support for a loved one with special needs. A special needs trust can also ensure that individuals who receive government benefits are not disqualified from receiving those benefits if they receive assets from their loved ones.
Provided that a third party, like a parent, funds a trust, there are fewer restrictions than there would be on a self-funded trust. These are a few of the most common ways that people effectively fund special needs trusts.
Real property and other assets
Funding a special needs trust can occur as soon as someone creates the trust. The grantor creating the trust may immediately transfer certain valuable property to the trust. Financial accounts and the residence where the family lives could both be useful sources of funding. Particularly if the goal is to allow the individual to remain at the home indefinitely in the future, transferring real property to the trust can help ensure a stable and predictable lifestyle for the individual with special needs.
Life insurance proceeds
Those seeking to support a vulnerable loved one may use life insurance when they do not have enough liquid capital on their own to provide consistent support. Naming the trust the beneficiary of a life insurance policy is a safer choice than arranging for those assets to pass directly to someone with special needs. That way, the trustee has the responsibility of managing those resources. There should be less risk of losing assets due to poor resource management or financial abuse when a trustee controls the proceeds from a life insurance policy.
A pour-over will
People often do not know when they might die or what assets they will have at that time. Particularly if someone does not want to give up control of their resources while they are still alive, a pour-over will can be a helpful way to fund a special needs trust. Pour-over wills allow assets passing through the Arizona probate courts to transfer into a trust after someone’s death. A pour-over will can ensure that the remainder of someone’s personal property helps fund a trust after their death. However, a pour-over will does have a drawback: a pour-over will may, under certain circumstances, trigger probate court involvement after death. If you are relying on a pour-over will to distribute your assets, first seek the advice of a knowledgeable estate planning attorney.
People do not need to have millions of dollars to supplement the standard of living for a loved one with special needs after their passing. Considering different funding options for an Arizona special needs trust can help improve a vulnerable person’s support and standard of living.