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A special needs trust may be the answer

Michigan residents wanting to leave money or assets to a relative who is currently receiving Social Security disability payments may want to consider not leaving an inheritance to the relative directly but through a supplemental or special needs trust. A direct inheritance could jeopardize disability payments and insurance, and this may affect the recipient in exactly the opposite way that was desired.

The special needs trust is a transfer vehicle in which the grantor and the trustee cannot be the same person. The trustee will have the ultimate say on how the beneficiary can spend the trust money. The trust must also be set up as irrevocable.

In addition, the trust must provide for the special needs person but not with necessary daily living requirements. Instead, it can be used for education, vacations, out-of-pocket medical care or additional personal assistance. It is a way to enhance the well-being of the special needs relative without risking the payments he or she is currently receiving and using for day-to-day expenses.

With so many different types of social security and disability benefits, in combination with many types of trust structures, a person who is interested in leaving funds to a relative after they have passed may consider the benefit of input from an attorney. Estate planning may help to leave a person with peace of mind knowing that assets will be distributed according to his or her wishes after passing on. An attorney may be able to assure that the paperwork for the estate is prepared and filed correctly and timely.

Source: News and Observer, "Money Matters: Special Needs Trust can help niece best in long-term ", Holly Nicholson, December 28, 2013

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