| Many of us have a family member or close relative | | | | separate trust document, since the terms of the trust |
| with a disability. We'd like to leave a portion of our | | | | will be contained within the will itself. |
| estate to help this family member but are unsure how | | | | Because the rules of each state vary as to whether |
| best to do this. Should we just make an outright gift? | | | | the terms of the trust will cause or not cause |
| What about a trust? Let's take a look at some of the | | | | disqualification, you really must work with an |
| options. | | | | experienced estate planning or elder law attorney to |
| The simplest method of assisting the family member is | | | | draft this trust for you. The attorney will be familiar with |
| an outright gift, either during lifetime or via our will. | | | | both the federal and state programs that might be of |
| However, if the disabled individual is already receiving | | | | benefit at some point to your family member, what the |
| government benefits such as SSI (Supplemental | | | | rules are under both federal and state benefits laws, |
| Security Income) or Medicaid, additional assets could | | | | how trusts work, the different income and estate tax |
| cause them to become disqualified from those | | | | ramifications of each trust option, and how best to |
| programs. On the other hand, some programs such as | | | | achieve your objectives. |
| SSDI (Social Security Disability Insurance) are not | | | | Examples of distributions that will not cause the |
| "means tested," i.e., are not affected by the assets or | | | | beneficiary to lose or have reduced government |
| income of the recipient. | | | | benefits: |
| Since a person may not need to receive | | | | - new car |
| "means-tested" benefits today but may require them in | | | | - attorney/accounting services |
| the future, the safest route is to leave them your gift | | | | - alternative health treatments |
| inside a trust. The trustee of the trust will hold your | | | | - TV, DVD player |
| money, invest it, and distribute it to your intended | | | | - public transportation pass |
| beneficiary as needed, without causing disqualification | | | | - camera |
| from government benefits. | | | | - computer hardware, software, internet fees |
| Such a trust is called a Special Needs Trust or | | | | - courses and classes |
| Supplemental Needs Trust, since it is designed to | | | | - dental work not covered by Medicaid |
| supplement---and not replace---government benefits. It | | | | - fitness equipment |
| can be created today and funded with money or | | | | - musical instruments |
| other assets now. Such a trust is called an "inter vivos" | | | | - non-food grocery items |
| trust. You can serve as the trustee or permit | | | | - physician specialists not covered by Medicaid |
| someone else to serve as trustee; the trust can be | | | | - utility bills |
| revocable or irrevocable; and you can retain power to | | | | - physical therapy not covered by Medicaid |
| change the ultimate distribution of the trust assets or | | | | - vacations |
| not. All of these decisions affect the income tax and | | | | The above is by no means an exhaustive list, but is |
| estate tax treatment of the trust. If you choose to | | | | only intended to give you some idea of what your gift |
| make the trust irrevocable, then it will have its own | | | | via trust can be spent on to make your family |
| federal tax i.d. number and can be set up to be taxed | | | | member's life so much better, without causing |
| either to you, the trust itself, or to the beneficiary. | | | | disqualification. As you can see, your gift will have |
| You can also set up the trust within your will, to be | | | | wide-ranging benefits for your family member and will |
| funded upon your death. Such a trust is called a | | | | improve their quality of life for many years. |
| "testamentary trust." In this case, you will not have a | | | | |