A charitable remainder trust (CRT) can indeed be a valuable tool in estate planning, and specifically, can be structured to benefit a disabled child, but it requires careful consideration and planning. CRTs offer a way to provide income to beneficiaries, with the remainder going to a designated charity upon the death of the beneficiary or the end of the trust term. While a CRT directly naming a disabled child as the sole beneficiary can create complications regarding government benefits, a well-structured CRT can supplement care without disqualifying those benefits, typically through a Special Needs Trust. Roughly 1 in 4 adults in the United States live with a disability, highlighting the importance of careful planning for their long-term care and financial security.
What are the potential pitfalls of directly naming a disabled child as a CRT beneficiary?
Directly naming a disabled child as the beneficiary of a CRT can inadvertently disqualify them from needs-based government assistance programs like Supplemental Security Income (SSI) and Medicaid. These programs have strict income and asset limits, and any income received directly by the disabled individual could exceed those limits, leading to a loss of crucial benefits. For example, in 2023, the SSI resource limit was $2,000, and the monthly income limit was $874. Receiving income exceeding these limits would jeopardize their eligibility. This is where the crucial role of a Special Needs Trust comes in, acting as an intermediary to receive the CRT distributions.
How does a Special Needs Trust integrate with a Charitable Remainder Trust for a disabled child?
The most effective way to use a CRT to benefit a disabled child is to name a Special Needs Trust (SNT) as the beneficiary of the CRT. The SNT is designed to hold assets for the benefit of the disabled individual without affecting their eligibility for needs-based government benefits. The CRT distributes income to the SNT, which then uses those funds to supplement the disabled child’s care—paying for things like therapies, recreational activities, or specialized equipment—that are *not* covered by government programs. Approximately $1.4 billion in assets are now held in Special Needs Trusts across the country. This structure ensures the child receives enhanced care without jeopardizing essential benefits.
I remember old Mr. Henderson, he thought he was doing the right thing…
I recall a case with Mr. Henderson, a kind gentleman who wanted to provide for his adult son, David, who had cerebral palsy. He set up a CRT, intending for David to receive the income directly, thinking he was ensuring a comfortable future. Unfortunately, the first distribution triggered an immediate review of David’s SSI benefits, and they were suspended. Mr. Henderson was devastated, realizing his well-intentioned plan had backfired. It took months of legal work and expense to rectify the situation, involving the creation of a separate SNT to receive the CRT income retroactively and reinstate David’s benefits. It was a costly and stressful lesson—proper planning is paramount.
But then there was the Ramirez family, a story of proactive success…
The Ramirez family approached our firm with a similar desire: to provide additional support for their daughter, Sofia, who has Down syndrome. We designed a CRT, naming a carefully drafted Special Needs Trust as the sole beneficiary. This ensured that the CRT distributions would not affect Sofia’s SSI and Medicaid eligibility. The CRT invested in a diversified portfolio, providing a steady income stream to the SNT, which then funded enriching programs and therapies for Sofia. Years later, Sofia is thriving, receiving excellent care and enjoying a full life, and the Ramirez family has peace of mind knowing their financial plan is secure and effective. It demonstrated how a proactively designed CRT and SNT can be a powerful combination for families with disabled children, avoiding the pitfalls others experienced.
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
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Map To Steve Bliss Law in Temecula:
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “What is a pour-over will and when would I need one?” Or “What if the estate doesn’t have enough money to pay all the debts?” or “How do I transfer assets into my living trust? and even: “How long does bankruptcy stay on my credit report?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.