In this edition of Counselor’s Corner, we are answering a frequently asked question: How can a special needs trust help me and my family? A special needs trust (SNT) is an indispensable tool in wealth preservation planning, specifically designed to protect and support the needs of individuals with physical, mental, or developmental disabilities. Here are the primary benefits of establishing a special needs trust: 1. Resource Preservation: One of the most significant benefits of a special needs trust is that it allows the beneficiary to maintain their eligibility for means-tested government benefits, like Supplemental Security Income (SSI) and Medicaid. These programs require the beneficiary to have limited resources. However, funds held in an SNT do not count toward these resource limits. This means the trust can hold assets that supplement, rather than replace, public assistance. 2. Flexibility: The funds in an SNT can be used for a wide array of goods and services that enhance the quality of life for the beneficiary. This includes education, recreation, counseling, personal care attendants, out-of-pocket medical expenses, and other items not covered by government assistance programs. 3. Management of Assets: An SNT provides for the careful management of assets for someone who may not be able COUNSELOR’S CORNER
to manage the funds themselves. The appointed trustee, who oversees the administration of the trust, has a duty to manage the trust’s assets responsibly and in the best interests of the beneficiary. 4. Protection From Creditors: Assets in an SNT are generally protected from creditors, meaning they cannot be seized to pay off the beneficiary’s debts. 5. Preservation of Family Wealth: An SNT enables parents or other relatives to leave inheritances or gifts to a loved one with special needs without disrupting their access to essential public benefits. 6. Personalized Planning: Lastly, an SNT offers a high level of customization. You can design a trust that perfectly fits the needs, circumstances, and future objectives of your loved one with special needs. A special needs trust offers peace of mind, knowing that a loved one with disabilities will be well-cared for, both financially and otherwise, without jeopardizing their access to critical public assistance programs. It provides a more secure future for individuals with disabilities, reflecting their unique needs and aspirations. Setting up an SNT can be one of the most significant steps you can take to safeguard the financial future and well-being of a loved one with special needs.
Don’t Pay More Capital Gains Tax Than You Should! Use This Estate Planning Loophole to Save
There are plenty of estate planning maneuvers, but when done without the guidance of an attorney, these techniques may end up costing your family a fortune. One action that can do more harm than good is transferring your assets into your children’s names. While it might seem like you’re helping them, they could miss out on a significant tax break: the step-up in basis.
a result, they could be left with little profit after forking over the capital gains tax.
Meanwhile, if your child were to inherit the property after your passing, they would only need to pay the capital gains tax from the market value at the time of your death instead of when it was initially purchased. The basis of the asset’s value is stepping up in time to adjust the appreciation value. That’s why it’s called a step-up in basis! The result? Your child will save on expensive taxes and start building wealth with this property’s profit.
What is the step-up in basis loophole? When you want to transfer a physical property or stocks into your child’s name, they will often need to pay a substantial capital gains tax. The value of these assets increases over time, and when you transfer them to your child, they will have to pay tax on all the appreciation, or the increase in value, from when you first purchased the property to the sale date.
Instead, try putting your assets in a living trust. So, how can your child take advantage of the step-up in basis? You can put your assets in a living trust and add them as a beneficiary. Instead of being considered an owner, your child will only inherit your estate after your death. While a living trust has plenty of benefits, you should always consult an attorney to understand if this is the right move for you, your specific assets, and your children.
Regarding homes, the value can significantly increase over just a few decades. After
two decades, the home’s appreciation can easily be hundreds of thousands of dollars. As
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