Legal Blog

The Weekly Scenario: Setting Up A Special Needs Trust For A Minor Child

Question:

I am looking to set up a special needs trust for a minor child.  Does the trust have to be irrevocable and can the trust also be the recipient of property left by my Will?

Answer:

There might be a number of ways to accomplish your goals.  However, the type of trust that will eventually be created will all depend on a number of factors. 1.  Most importantly, your goals.  Specifically, what do you seek to accomplish with the trust?  The term ‘special needs’ might have different meanings to different people so this is a point which certainly needs to be explored in more detail. 2.  Contributions to the trust.  Namely, whose property is going to be contributed to the trust?  Your property?  The child’s property?  Property originating from other family members? 3.  Type of property contributed to fund the trust.  What type of property will the trust hold?  Real estate, securities, a combination of both real estate and other assets? 4. Payment of taxes.  How specifically will taxes be paid? The answer depends on all these factors and others as well.  As a general rule, the special needs trust will be established as an irrevocable trust.  But it is also possible for a document to start out as a revocable trust which becomes irrevocable at the time the special needs trust is funded, or for the trust to be a mere instruction in a Will to be created at a later date in time. It is important to understand the type of property that is anticipated to fund the special needs trust and when funding will take place. Comment:  I find that it is common for people to ask legal questions which cannot be answered without a more in depth discussion.  In fact, by doing one thing, it will certainly impact something else (whether anticipated or not). As always, if you have questions or would like to know more please contact Steven E. Shane at: Steve Shane Head Shot for websshane@offitkurman.com | 301.575.0313. Steve provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates. You can also connect with Offit Kurman via FacebookTwitterGoogle+YouTube, and LinkedIn.