Wills vs. Trusts for Special Needs Planning: Which Is Right for Your Family?

Two of the most critical tools in this process are wills and trusts. While both play a role in managing and distributing assets, they serve very different purposes, especially in the context of special needs planning. Understanding how they work and how they differ is essential to deciding which tool is right for you and creating a plan that protects your loved one’s future and provides you with peace of mind.

At the Law Offices of Wenarsky and Goldstein, LLC, we understand the challenges families face when planning for special needs care. Our goal is to guide you through this complex process, help you make informed decisions, and create an effective strategy tailored to your family’s unique situation. 

Read on to learn more about the key differences between wills and trusts and how they can impact your special needs planning.

What Is a Will?

A will is a legal document through which its maker (the testator) specifies how their assets will be distributed after their death. Creating a will would allow you to:

• Designate Beneficiaries: You can decide who will inherit your property, such as your home, bank accounts, or personal belongings.
• Name Guardians: if you have minor children, a will lets you nominate someone you trust to care for them if you are no longer able to.
• Express Your Final Wishes: A will can outline specific instructions, such as funeral arrangements or special gifts to loved ones.

While wills are a cornerstone of estate planning, they do have very certain limitations, particularly in the context of  special needs planning:

• Lump Sum Distribution: Assets left through a will are typically distributed in a lump sum. For individuals with special needs, this could jeopardize their eligibility for finance/income-based government benefits like Medicaid or Supplemental Security Income (SSI).
• Probate Process: A will must go through probate, a court-supervised process that can take months or even years. This delay can create challenges for families or individuals who need quick access to funds.
• No Ongoing Management: A will typically does not allow for ongoing oversight or management of assets, which is often necessary for individuals with special needs who require long-term care.

If you are considering creating a will as part of your special needs plan, it is important to consider these limitations and their potential impact before you proceed.

What Is a Trust?

A trust is a legal arrangement in which a trustee manages assets (the trust fund) on behalf of a beneficiary based on specific guidelines and instructions established by the creator (grantor). Unlike a will, a trust can be created and take effect during your lifetime, giving you greater control over how your assets are managed both now and in the future.

Some of the key features of trusts include:

• Flexibility: You can set specific terms for how and when assets are distributed, ensuring they are used appropriately. For example, you can arrange for regular payments for medical care, housing, or education.
• Avoidance of Probate: Assets held in a trust generally bypass the probate process, allowing them to be distributed quickly and privately.
• Ongoing Management: A trust can ensure that a responsible trustee oversees your loved one’s financial needs long after you’re gone.

Several types of trusts serve different purposes. However, certain types of trusts, such as special needs trusts, can be particularly beneficial for families with special needs beneficiaries. 

Special Needs Trusts

Special needs trusts (SNTs) are specialized legal tools whose primary purpose is to protect and provide for individuals with disabilities or special needs without risking their eligibility for government benefits. These trusts ensure that your loved one can receive additional financial support for expenses that go beyond what government programs like Medicaid or Supplemental Security Income (SSI) cover.

An SNT works by holding and managing assets separately from the beneficiary’s personal finances. Because the funds in the trust are not considered the beneficiary’s property, they do not interfere with income or asset limits for government assistance. This allows your loved one to maintain essential benefits while also accessing additional resources to enhance their quality of life.

Setting up a special needs trust or any kind of trust requires careful planning and attention to detail. An estate planning professional can help you navigate the legal requirements and help you create an effective trust if it aligns with your estate planning goals. 

Control Over Assets

Wills and trusts differ significantly in how they allow their creators and other third parties to control the assets that they govern. 

Wills only take effect after your death, meaning they do nothing to manage or control your assets while you are alive. During your lifetime, your assets remain entirely under your ownership, and the will has no legal authority to direct their use or protect them. For families with special needs beneficiaries, this limitation can be particularly problematic, as it offers no mechanism to allow someone else to manage or safeguard assets in real-time to meet ongoing or future needs.

 In contrast, a trust, depending on its structure, can allow you to maintain control and manage the trust assets or appoint a third party (trustee ) for the role while you’re alive, ensuring they are used as intended to provide ongoing support for your loved one from the point of creation.

Timing of Asset Distribution

Timing is crucial in special needs planning. Wills distribute assets all at once, which may not align with the long-term needs of a beneficiary with special needs. This one-time distribution can also inadvertently disqualify them from essential government programs.

Trusts, on the other hand, allow for structured, gradual distributions. You can specify how often funds are released and for what purposes, ensuring that your loved one has consistent support over time.

Avoiding Probate

Avoiding probate is one of the key advantages of employing a trust instead of a will. Probate can be a lengthy, public, and costly process that you might want to avoid, particularly when swift access to funds is needed for a special needs beneficiary.

Trusts eliminate the need for probate, facilitating a smoother transfer of assets. Trusts also ensure privacy, as probate proceedings are public records. This means the beneficiary’s financial situation and circumstances remain confidential, thus safeguarding their dignity and personal information.