Avoiding Legal Trouble

Questions To Ask When Setting Up A Supplemental Needs Trust

A supplemental needs trust can provide much-needed stability in the life of a beneficiary who may be facing physical or mental challenges. The process of configuring one, though, is highly legalistic and should only be approached with appropriate counsel. If you're trying to figure out what should go into a special needs trust, here are three questions you'll want to ask an attorney before you get too far into the process.

Will Government Benefits Still Be Available?

Access to the Medicare and Medicaid systems is often a major concern of people who have medical needs. While coverage can't be denied by private insurers due to pre-existing conditions, that doesn't mean that private insurance is going to be affordable. A trust can be designed to ensure it keeps a beneficiary within the guidelines to be eligible for Medicare and/or Medicaid, and that should be on your mind if the beneficiary has a condition that will be expensive to treat or that could become prohibitively costly in the future. If the trust isn't properly configured, assets in the trust may be seized to compensate the government for treatment and care costs.

How Will the Trust Be Protected?

Life happens, and that includes some of the downside legal risks like being sued or ending up in a divorce proceeding. It's important that an attorney can assure you that a trust will be configured so it can't be accessed as part of legal proceedings against the beneficiary.

The administration of the trust should also be set up to ensure that it can't be easily changed or challenged. For example, if a beneficiary were to get married, there should be a legal backstop in place to prevent their spouse from accessing the funds in the trust. The trustee needs to be empowered to protect the trust from outside interference and even efforts by the beneficiary to subvert the will of the grantor.

What Happens to Funds When the Beneficiary Dies?

A properly designated trust should be able to outlast the beneficiary regardless of age and long-term medical outlook. This means there will be funds left when the trust has outlasted its purpose. If there aren't specific terms in the trust regarding how it is paid out upon death or other forms of disbursement, it may become the subject of a probate proceeding. Always make sure there are end-of-life provisions that direct funds to desired destinations, such as the beneficiary's spouse, their children, helpful relatives, or a preferred charity.