If you are physically or mentally disabled or care for someone who is, estate planning requires additional, unique considerations. Failing to structure an estate plan—and the instruments used within that plan—properly can result in the disabled individual losing eligibility for critical public, private, or charitable benefits. In Arizona, the law allows residents to establish a trust that provides for the needs of a disabled individual without compromising eligibility for other benefits. Here, we will explain what an Arizona special needs trust is and how it works.
The Purposes of an Arizona Special Needs Trust
Trusts are set up to hold property and assets for the benefit of a specified beneficiary or beneficiaries. In Arizona, a special needs trust must be created and maintained for the benefit of a person with a disability as outlined in the Arizona Revised Statutes § 14-10103. Under the law, one of the purposes of the trust must be to enable the disabled individual to continue to be eligible for public, private, or charitable benefits.
An Arizona Special Needs Trust Must Be Properly Structured and Administered
When properly structured, a special needs trust in Arizona can provide for care and expenses that are not covered by other benefits for which the disabled individual is eligible. If the funds from the trust are not used as required by law, however, distributions from the trust to the disabled person could be counted as income. This could result in a reduction or loss of benefits if it raises the beneficiary’s income above the program’s limits.
When a special needs trust is created in Arizona, it must meet the requirements of Arizona trust laws as well as requirements specific to special needs trusts. It is important to name a trustee who is qualified to administer the trust. This person or entity will be responsible for ensuring that tax and accounting matters are properly handled as well as distributing the funds appropriately in a manner that does not compromise other benefits, like Supplemental Security Income (SSI) and Medicare.
The trustee also should be knowledgeable regarding Arizona programs that administer these benefits, like the Arizona Health Care Cost Containment System (AHCCCS) and the Arizona Long Term Care System (ALTCS).
Funding a Special Needs Trust in Arizona
In Arizona, three kinds of special needs trusts can be created: a first-party trust, a third-party trust, or a pooled trust. A first-party trust is funded by the beneficiary of the trust. These are most often used when the person accumulated assets before being diagnosed with a disability or received assets—such as an inheritance or settlement—after being approved for benefits like SSI or Medicare.
A third-party trust is created by someone other than the beneficiary, like a parent or other family member. This kind of special needs trust is commonly used to provide for the ongoing care of a loved one with a disability.
A pooled trust combines the assets of multiple special needs trusts to provide additional investment leverage while maintaining a separate account for the beneficiary within the larger trust. Pooled special needs trusts in Arizona must be administered by a nonprofit organization.
Determining how much is needed to fund a special needs trust requires an evaluation of the beneficiary’s ongoing needs. An Arizona special needs estate planning lawyer can help you assess the funding needs of the trust and set it up in compliance with all relevant laws and rules so the beneficiary is provided for throughout their lifetime.
Contact Attorney Bernard Strass to Create Your Arizona Special Needs Trust
Estate planning lawyer of Desert Rose and Elder Law knows the unique challenges of special needs estate planning. He will use his years of experience to develop a comprehensive special needs trust that ensures the beneficiary retains access to public, private, and charitable benefits while receiving payments that improve his or her quality of life.
Don’t leave the future up to chance. Contact Desert Rose Estate and Elder Law to discuss your Arizona special needs trust or other special needs estate planning matters at (602) 644-1406 or fill out this to set up a consultation.