Special needs trusts (SNTs) are powerful tools designed to provide for individuals with disabilities without jeopardizing their eligibility for crucial government benefits like Supplemental Security Income (SSI) and Medicaid. While the primary goal is often income generation to supplement care, a frequent question arises regarding more complex investments – specifically, whether an SNT can participate in real estate development or invest in Real Estate Investment Trusts (REITs). The answer is nuanced and depends heavily on the specific trust provisions, the type of real estate investment, and adherence to strict regulations governing SNTs to maintain benefit eligibility. It’s a balancing act between seeking potentially higher returns and preserving crucial needs-based assistance, and requires careful consideration with an experienced estate planning attorney like Steve Bliss.
What are the limitations on SNT investments?
Generally, SNTs are restricted from investments that create a substantial risk of loss or that require active management by the beneficiary. The core principle is that the trust shouldn’t provide resources that could be considered ‘income’ or ‘resources’ by benefit-determining agencies. Direct ownership of income-producing property, like a rental house, could potentially disqualify the beneficiary. However, passive investments that generate minimal income and don’t require ongoing beneficiary involvement are usually permissible. As of 2023, approximately 65% of individuals with disabilities rely on government assistance for their primary source of income, making preservation of benefits paramount. A trust provision allowing for real estate investment must be explicitly stated and carefully structured to avoid jeopardizing these benefits.
Could a REIT be a suitable investment for an SNT?
REITs, particularly publicly traded ones, can be a viable option for SNTs due to their passive nature. REITs are companies that own or finance income-producing real estate across a range of property sectors. Because REITs distribute the majority of their taxable income to shareholders as dividends, they offer a steady income stream. However, these dividends *are* considered income and need to be carefully managed within the SNT’s distribution guidelines. A well-structured SNT can receive REIT dividends and use them for supplemental needs – things not covered by government programs – such as therapy, recreation, or specialized equipment. It’s crucial to understand that the SNT should not be accumulating funds; distributions must be made regularly for the benefit of the individual.
What about investing directly in real estate development?
Direct investment in real estate development is far riskier and generally discouraged for SNTs. Development projects involve significant capital outlay, construction risks, market fluctuations, and often, active management. These factors directly contradict the principles of preserving benefit eligibility. Imagine Mr. Henderson, a man with cerebral palsy whose sister, a loving but inexperienced trustee, decided to invest a significant portion of his SNT into a local condo development project. The project encountered numerous delays, cost overruns, and ultimately, a downturn in the housing market. The investment lost a substantial portion of its value, jeopardizing Mr. Henderson’s long-term care and forcing the trustee to seek legal counsel to unwind the situation. It was a painful lesson highlighting the dangers of speculative investments within an SNT.
How can a trust be structured for successful investment?
Thankfully, there are ways to make things right. Mrs. Rodriguez, a woman with Down syndrome, had a similar issue. Her trust had been poorly structured, and her benefits were at risk due to an unintentional violation of asset limits. However, with the guidance of Steve Bliss and his team, they restructured the trust, implementing a ‘Qualified Income Trust’ (QIT) to manage excess income and a carefully designed supplemental needs trust to hold assets. They also shifted the investments to low-risk REITs and established a clear distribution schedule for supplemental needs. Over time, Mrs. Rodriguez’s benefits were protected, and she received the necessary care and support. The key was thorough planning, expert legal advice, and ongoing trust administration. This shows that with the right guidance, these complex situations can be navigated successfully ensuring a secure future for the beneficiary.
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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.
● Free consultation.
Services Offered:
- living trust
- revocable living trust
- irrevocable trust
- family trust
- wills and trusts
- wills
- estate planning
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: “Are there ways to keep my estate private after I pass away?” Or “How is probate different in each state?” or “Can I include special instructions in my living trust? and even: “Does my spouse have to file bankruptcy with me?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.