Special needs trusts in Westchester County are powerful legal tools that help you provide for a disabled family member while making sure they maintain eligibility for government benefits. But unless you fund the trust and follow all the legal requirements, they might not have the financial support they need in years to come. Learn more about funding a special needs trust in Westchester County below.
Why Is Funding a Special Needs Trust Crucial?
Without proper funding, a special needs trust can’t serve its purpose of covering your family member’s essential expenses like medical care and housing. Without funding, a trust cannot become a legal entity, and it cannot function.
What Types of Assets Are Used to Fund Special Needs Trusts?
Common assets used to fund a special needs trust in Westchester County include:
- Cash or savings
- Stocks and bonds
- Real estate
- Life insurance proceeds
- Inheritance
- Personal property (e.g., jewelry or collectibles)
- Compensation from a personal injury settlement
- Retirement accounts
What Are the Different Methods for Funding a Special Needs Trust?
There are several ways to fund a special needs trust, depending on your situation and goals. One common method is lump-sum deposits, where you place a large amount of money or assets into the trust at once, such as an inheritance or settlement. Another option is to designate the trust as the beneficiary of a life insurance policy, which will provide funds to the trust upon your death.
You can also use regular contributions, where you add money to the trust over time, allowing it to grow gradually. Retirement accounts can also fund a special needs trust, but there are strict rules for placing retirement accounts into special needs trusts, so it’s important to work with an attorney to handle these assets properly.
How Do Taxes Impact Trust Funding?
Taxes can significantly impact how you fund a special needs trust, so it’s crucial to plan carefully. When you transfer assets into the trust, such as cash or investments, you may face federal gift tax limits. If you exceed the annual gift tax exclusion, you could owe taxes on the transfer. However, some types of trusts, like third-party trusts, may offer ways to minimize these taxes.
Another important consideration when funding a special needs trust is capital gains taxes. If you place appreciated assets into the trust, such as stocks or real estate, selling them could trigger capital gains taxes. Lastly, estate taxes might apply if you fund the trust after your death, as both New York and the IRS apply taxes on estates over certain values. A properly structured special needs trust can help reduce your capital gains and estate tax exposure.
How Can a Special Needs Trust Attorney Help Me Customize a Trust for My Needs?
A special needs trust attorney can help you choose the right type of trust and customize it to fit your family member’s situation. They will assess their individual needs, government benefits, and long-term care plans to create a tailored trust that provides ongoing financial support without jeopardizing eligibility for benefits like Medicaid or Supplemental Security Income (SSI). An attorney can help select a reliable trustee to manage the funds.
The Westchester County special needs trust attorneys at Amoruso & Amoruso LLP have nearly six decades of experience with these complex legal issues. Call us today or complete our contact form to schedule a confidential consultation and learn how we can help you fund a special needs trust for someone in your family.
