Secure Your Loved One’s Future with a Special Needs Trust in North Carolina

By Brady Cobin Law Group, PLLC | April 24, 2023

It’s National Developmental Disabilities Awareness Month: Secure Your Loved One’s Future With a Special Needs Trust in North Carolina

Raleigh, NC. – February 23, 2023. In honor of March 2023, Developmental Disabilities Awareness Month, Brady Cobin Law Group shares valuable advice about why North Carolina families should consider setting up a special needs trust (SNT) as part of their estate planning. In a nutshell, an SNT can help protect the assets of a person with special needs while preserving this person’s eligibility for public benefits.

Why Create a Special Needs Trust?

Many state and federal programs offer benefits for people with disabilities. Often, to be eligible for these benefits, people with special needs must show that their total assets fall below a certain threshold. Receiving an inheritance or a large settlement may disqualify an individual with special needs from receiving government benefits.

A special needs trust can help bypass the personal asset restrictions of public benefit programs. The trust holds, invests, and controls assets, while the person with special needs (a.k.a. the beneficiary) only gets funding from the trust without having direct access to trust property.

Thus, trust property doesn’t count toward asset thresholds and doesn’t harm the individual’s eligibility for benefits. A well-planned special needs trust can also protect property from creditors, Medicaid, and other claims.

Types of Special Needs Trusts in North Carolina

North Carolina recognizes different types of special needs trusts. In all of them, an independent trustee is responsible for handling trust management and asset distribution. The trustee, who can be a family member or a professional trust manager, is under a fiduciary duty to promote the beneficiary’s interests.

Special needs trusts in North Carolina include:

  • Third-party SNT. A third-party special needs trust receives its funding from someone other than the disabled person. Often, a parent or another family member is the grantor. When the disabled beneficiary passes, the trust distributes its assets according to the grantor’s wishes. This type of trust can be revocable or irrevocable.
  • First-party SNT. A first-party special needs trust gets its assets from the person with special needs. The trust often holds inherited property or proceeds from an insurance or lawsuit settlement. A first-party SNT must be irrevocable to preserve the beneficiary’s eligibility for public benefits. After the beneficiary’s passing, Medicaid may have a claim on remaining trust assets to repay benefits the disabled person used during their lifetime.
  • Pooled trust. Pooled SNTs are special needs trusts under the management of a nonprofit organization. This arrangement provides common administration and investment services for many beneficiaries’ trusts, which is more affordable than running an individual SNT. Pooled SNTs may be either first- or third-party trusts.

Costs a Special Needs Trust May Cover

To comply with state requirements, a special needs trust must act with the sole purpose of assisting the disabled beneficiary. Depending on the grantor’s wishes and the beneficiary’s needs, SNTs may fund various expenses, including the following:

  • Medical expenses that go beyond what Medicaid covers
  • Education and professional rehabilitation
  • Personal assistance for the disabled person
  • Home maintenance and vehicle service
  • Utility bills
  • Electronics and computers
  • Vacations and recreation

When an SNT covers in-kind support and maintenance, which only includes food and shelter for the beneficiary, it may affect SSI benefits differently from cash value payouts. An experienced trust planning attorney can help families understand how to set up and manage an SNT to protect their loved one’s eligibility for benefits.

For More Information

To learn more about the advantages and process of setting up a special needs trust in North Carolina, contact Brady Cobin Law Group at (919) 782-3500 or through the law firm’s online form.

Posted in Uncategorized