Experts estimate that nearly 1 in 4 Americans suffer from mental illness. If your loved one is battling mental illness, estate planning can become complicated. Many people find themselves wondering how they can leave behind an inheritance for a mentally ill loved one without making that person ineligible for government benefits like Social Security disability benefits or Medicaid. Fortunately, discretionary trusts can provide the answers you may be looking for.
Why Establish a Discretionary Trust?
Eligibility for government benefits is based upon certain income restrictions. If you were to will any sum of money directly to your mentally ill loved one, this inheritance would be considered income by the federal government. Any increase in income could jeopardize your loved one's ability to receive benefits.
Because a discretionary trust does not grant the individual direct access, but requires a trustee to distribute payment on the beneficiary's behalf, these trusts are exempted from being counted as income according to section 01110.115 of the U.S. Social Security System's Program Operations Manual System. Establishing a discretionary trust means that you will be able to provide funding for medical expenses without interfering with eligibility for government benefits.
Choosing a Trustee
Since the trustee has a significant amount of power when it comes to distributing the funds you leave behind for your mentally ill loved one, selecting the right trustee should be an important part of your estate planning process.
While some people choose to appoint a family member or close friend as trustee of the discretionary trust they establish, others opt to invest in a professional trustee. Hiring a professional trustee ensures that you will not have to worry about where your money will go in the event the trustee passes away, and these professional trustees are usually regulated by the government to ensure honesty.
As with any legal proceeding, a discretionary trust could cause problems if you fail to set it up correctly. Partnering with a reputable attorney will allow you to ensure that your trust meets all the legal requirements set forth by the state in which you live. An attorney will help prepare to necessary paperwork, advise you on the selection of a trustee, and identify any potential pitfalls that may derail your estate plan.
It's better to work with an attorney throughout the estate planning process to ensure that your mentally ill loved one will be provided for properly after your passing.
Estate planning plays an important role in allowing a person to continue providing for those they love, even after death. If you want to provide for a mentally ill spouse, child, or loved one, then establishing a discretionary trust could give you the ability to do so without jeopardizing your loved one's eligibility for benefits. For more information, contact an experienced company, like Life's Plan Inc.
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