It isn’t unusual for a trust to be created that is designed to offset some financial concerns an individual with special needs has. The trust, which is legally referred to as a special needs trust, is worded in such a way that it provides the recipient with an income that does not negatively impact their ability to receive public assistance in the form of Medicaid and Social Security.
Most special needs trusts are set up by parents or another concerned relative who is worried about what will happen to the recipient when their parents pass and are no longer able to directly oversee their child’s financial situation. It isn’t unusual for some people who are connected to the person named in the trust to wonder if it’s possible to revoke a special needs trust.
The short, quick answer to the question is a special needs trust revocable is no.
As a rule, once a special needs trust has been created, it’s an irrevocable trust. In some extreme cases, a judge will rule to terminate a special needs trust, but these situations are extremely rare and are often quite expensive.
While the idea of an irrevocable special needs trust is often a good idea, particularly since it helps prevent others from potentially misdirecting the funds for their own gain. However, there are some drawbacks to the irrevocable nature of a traditional special needs trust.
One of the reasons so many parents like creating a special needs trust for their child is because it can’t be canceled, and the terms can’t be changed. On the surface, this seems like the ideal way to make sure that the child’s finances are set for life and that they never have to worry about lacking the funds needed to finance their care.
The problem with the irrevocable nature of special needs trusts is that the terms of the trust can’t be altered to accommodate changing circumstances.
The first problem is that it’s sometimes difficult to know if the beneficiary’s health will grow worse. It does, and their medical expenses increase, the special needs trust may prevent them from accessing the additional money needed to cover expensive bills.
The even more concerning issue with irrevocable special needs trust is that there are many programs, including Medicaid, that are only available if the beneficiary meets certain income requirements. If this is a concern for the beneficiary and the party creating the trust, one option is setting up a first-party or third-party special needs trust that’s drafted in such a way the trust and the beneficiary’s assets can be managed in a manner that allows them to be eligible for government programs.
The purpose of a first-person special needs trust, which is also called a Self-Settled SNT, is to enable the beneficiary to maintain any assets or financial gains they acquired through things like lawsuits, inheritances, and gifts. This type of trust is a good idea for anyone who was injured as a direct result of an accident.
The benefits of this type of special needs trust include:
A third-party special needs trust, or a pooled special needs trust, is ideal when the beneficiary is unlikely to receive a significant source of money or assets from a single source and requires a trust that allows them to pool their resources. Once the various resources are pooled together, it is managed by a third party who is supposed to try and use the funds to make investments that will be set aside for the beneficiary’s future.
The advantages of this type of special needs trust include:
Special needs trusts are extremely important. They have a massive impact not only on the beneficiary’s peace of mind but also on their ability to receive the medical care they need as they grow older. It’s important to sit down with an experienced special needs trust expert who has the knowledge needed to help you see and understand the pros and cons of the different special needs trusts. The amount of time you dedicate to drafting the best possible special needs trust for your loved one will have a huge impact on their future quality of life. Contact us today.