Many families in Evansville and elsewhere in Indiana have members with medical conditions that prevent them from earning a living. Parents often worry about how to provide for such family members after their deaths. These worries have been largely ameliorated by the development of an estate planning tool intended to permit the accumulation of assets for the benefit of the disabled family member without adverse income tax consequences and without jeopardizing eligibility for government financed care programs such as Medicaid or Supplemental Security Income. The device is called a “special needs trust” or SNT.
What is a special needs trust?
A special needs trust is much like any other trust: the person establishing the trust specifies a trustee, and the trust instrument specifies the uses to which the trust’s funds may be applied. In order to qualify as a special needs trust in Indiana, the trust instrument must limit the use of trust assets to specified needs of the beneficiary. Approved needs generally include medical supplies and services not covered by insurance or Medicaid. A special needs trust can also be used to pay housing expenses of the beneficiary.
Choosing a trustee
A trustee of an SNT can be either an individual, such as a lawyer or banker or someone in whom the settlor places special confidence, an professional trust such as the trust department of a bank. Another option is the ARC of Indiana, a non-profit organization experienced in providing trustee services to SNTs. ARC of Indiana also operates and serves as trustee of the ARC Master Trust. This trust pools assets from many SNTs across the state and manages the assets to maximize the financial return for all trust beneficiaries.
Where to start
The first move in establishing an SNT is a consultation with an experienced family law attorney. A knowledgeable lawyer can review the family situation, offer advice on the type of SNT that would fit best, and prepare the proper documents.