Estate Planning Attorney: How to Leave Property to a Special Needs Trust

If you want to leave property to a loved one with a disability, you must plan carefully. Setting up a Special Needs Trust will help support your loved one after you pass. But, there are many important things to know before you get started. In today’s blog, the estate planning attorneys at Davidson Law Group explain how to leave property to a special needs trust.

Who Can Give Property to a Special Needs Trust

Anyone can contribute property to a special needs trust, with the exception of the beneficiary of the trust. While parents typically make these trusts for their children, you don’t need a family relationship to create or give money to a trust for someone. There is also no limit to the number of trusts that may be created for a particular beneficiary.

How to Leave Property to a Special Needs Trust

Most people who make a special needs trust leave property to it when they pass. You have several options for funding the trust after your death, including wills, living trusts, and many kinds of beneficiary designations.

Wills

Your will can be used to specify which property you want to be held in the Special Needs Trust. You can leave almost any kind of property in your will — bank accounts, houses, businesses, personal property, or intellectual property (patents, copyrights, and trademarks).

Revocable Living Trusts

A revocable living trust can also be used to fund a Special Needs trust. Unlike assets in a will, trust property does not need to go through probate court proceedings. The trust document lists the property that should pass to the trust rather than to the beneficiary directly. Property that is not held in your revocable living trust will pass under the terms of your will. Therefore, most people with a living trust make a will as well, to handle any property that hasn’t been transferred to the living trust.

Beneficiary Designations

You can also use beneficiary designations to leave assets to your Special Needs trust. Beneficiaries can be named on different types of financial accounts, such as bank and brokerage accounts, retirement plan money (IRAs, 401k plans), securities, and life insurance. When using beneficiary designations, it’s important to name the trust as the beneficiary and not your loved one.

Related Post: Common Questions About Special Needs Planning

Keeping Your House Out of Probate

A growing number of states, including Texas, now offer an easy alternative for real estate transfer to beneficiaries. You can use a transfer on death deed to transfer real property to a named beneficiary when you pass, without probate.

Leave the Beneficiary’s Property Out of the Trust

Your loved one may receive property in the future, like an inheritance from a relative. It’s best to leave the beneficiary’s property out of the trust. If you add the beneficiary’s own property to the Special Needs Trust, the total amount could exceed the resource limit of $2,000, which would make him or her ineligible for Medicaid and Supplemental Security Income (SSI).

Davidson Quick Tip: It is usually unnecessary to fund a special needs trust before you die. However, if you believe that you need to add money to the trust while you are living, get in touch with our attorneys to mitigate gift tax consequences.

Related Post: Special Needs Planning Case Study: A Teen Boy Who Became Disabled

Our Estate Planning Attorneys Are Here For You

Special Needs Trusts can get fairly complicated, and we are here to make the process easier for you and your family. For thorough guidance and expert advice, consult with an estate planning attorney from the Davidson Law Group. Schedule your free initial consultation in Fort Worth, Allen, or Tyler.