Many people create an estate plan with a loved one’s needs in mind. Sometimes, their loved one has a disability or other needs that require their financial support. A special needs trust can provide financial support to the person who needs assistance, while still allowing him or her to remain eligible for government benefits like Medicaid, for example.
Special needs trust
Government programs often have income and asset limits. This means that if the person who is receiving government benefits is given money or other assets over the limit it could eliminate his or her eligibility to participate in the program.
The money in a special needs trust is intended to be a supplement to the government benefits and the expenditures from the trust must be accounted for each year.
Types to consider
There are a few types of special needs trusts to consider. A third-party special needs trust is funded by a person other than the beneficiary, like a parent or grandparent. A third-party special needs trust can be set up two ways. It can be set up as a stand-alone trust or a testamentary trust.
A stand-alone trust may be a good option for a person who wants to provide financial support during his or her lifetime to the beneficiary. It can be put in place immediately.
A testamentary trust allows a person to leave the trust as an inheritance. It is not funded until the trust creator dies.
A pooled trust combines trusts for several beneficiaries. They are usually managed as one trust, with separate accounts for each beneficiary. They are set up and managed by non-profit organizations.
An experienced attorney can answer questions and provide advice about special needs trusts.