When establishing an estate plan, questions often arise about how to best plan for loved ones suffering from mental illness. Whether that loved one is dealing with a mental disability, a psychiatric disorder, or even a substance abuse problem, a special needs trust may be a good option to consider.
Special needs trusts can provide protection for incapacitated individuals while also allowing for some flexibility and independence. Often the settlor and trustee of this type of trust is a parent or other family member, and having that person in control of the beneficiary’s assets can help protect them from being wasted when the beneficiary is having a period of incapacity or relapse. The trustee can allow the beneficiary via controlled distributions from their trustee more access to the assets when they are well or have recovered, but in the interim, they can provide necessary oversight on the use of the assets. It is important to remember that should the beneficiary be a recipient of government assistance, there will be guidelines the trustee must follow as to what the Trustee may pay and not pay for so as to not risk those benefits.
Once set up, special needs trusts are generally irrevocable. These trusts are a better long-term option when there is a disability involved versus a traditional revocable trust because it takes the management out of the individual’s hands. If the individual were to set up a revocable trust for themselves, they could easily make changes or revoke the trust against their best interest during a period of incapacity. Another long-term benefit is that they can continue to provide protection and support for the disabled individual even after the initial trustee and/or settlor’s death. This can offer parents or family members invaluable peace of mind that their loved one will be cared for even if something should happen to them.
Special needs trusts are just part of the planning process. There are many other options available including traditional third party revocable trusts, irrevocable trusts, ABLE accounts and controlled debits cards that can provide your loved one more access to to the funds. If you have questions about special needs trusts or any other estate planning matters, give us a call at (804) 423-1382, or email us at info@wmmlegal.com.
