If you have a child, relative or friend with special needs, understanding how Missouri laws can impact your estate plan can help you plan for their future. Care must be taken to ensure they can benefit from government programs while you provide for their future.
Understanding a special needs trust in Missouri
A special needs trust is a tool that can be used in estate planning to provide for a person with disabilities while still allowing them to receive government benefits. The trust’s purpose is to hold assets for the benefit of the disabled person without making them ineligible for government programs like Medicaid and Supplemental Security Income (SSI).
Missouri law recognizes two types of special needs trusts: first and third-party trusts. First-party trusts are funded by the disabled person’s own money, such as gifts, inheritance or personal injury settlement. On the other hand, third-party trusts are funded by someone else, such as a parent, grandparent or other relatives.
How special needs trusts work
The trustee of a special needs trust has discretion over how to use the trust assets to benefit the disabled person. They can use the assets to pay for items not covered by government benefits, such as medical and dental care, education, housing, transportation and recreational activities. Further, the trustee cannot give the disabled person cash from the trust; that would make them ineligible for government benefits.
There are several ways to fund a special needs trust, including:
- Making it the beneficiary of your life insurance policy
- Naming it as a retirement account beneficiary
- Transferring assets into it during your lifetime
- Leaving assets to it in your will or revocable living trust
It can be a good idea to set up a special needs trust as early as possible, preferably before the disabled person turns 18. If you wait until after the person becomes an adult, there may not be enough time to establish the trust and transfer assets into it before they become ineligible for government benefits.