Special Needs Trust: What You Need to Know

Special Needs Trust: What You Need to Know

A special needs trust is created for an individual with a disability. Whether it’s an impairment, learning disability, psychological, behavioral, or physical in nature – someone with special needs requires a level of assistance in their day-to-day lives.

In most instances, it’s family members – usually the parents – who set up this type of financial trust for their disabled child. There are also situations wherein another family member or a close family friend donates the asset to the special needs trust.

Those trusts are more challenging to set up. The government may also require a settlement for particular benefits established through the trust.

What’s the basis for this trust?

The primary foundation for establishing this type of financial trust comes from the fact that without it in place, the disabled individual would not be eligible to receive benefits. Whether it’s Medicaid or the Supplemental Security Income (SSI), the absence of this type of trust renders the disabled individuals unqualified to get them.

With that being said, those benefits will still continue. The disabled person, however, won’t have the capacity to access the accounts.

Does my situation warrant a special needs trust?

Every situation is unique. The best advice we can give right now to make sure that you’re qualified to set up this type of trust is to consult a trust attorney.

Anyone can create this type of trust. However, not everyone is capable of it. As with any legal matter, there are complicated procedures involved in ensuring your trust is foolproof. From properly handling all tax-related issues to every estate planning component – the direction of a trust attorney is needed.

Choosing a Trustee

A trustee is someone who manages and distributes the funds on behalf of the disabled individual. Primarily, a trustee administers this type of trust and makes the essential financial decisions.

Choosing a trustee is challenging.

Because of the massive responsibility of a trustee, it’s vital that when you establish a special needs trust, you choose a trustee wisely.

Select someone who will have your best interests – especially in terms of providing for your disabled loved one.

Choosing a trustee is challenging. Most people will go to another family member. However, that’s not always the best option – especially if there’s any history of disputes among family members. In this case, seeking the professional advice of an estate planning or trust attorney can be helpful.

This way, you’ll know the best person to choose to carry out the stipulations of the trust you created.

It’s also a sensible idea to identify a successor or secondary trustee. If your first pick is unable to perform trustee responsibilities, it’s good to have a backup. 

Along with other types of trust, cash is the most common property included in this trust. Additionally, the trustee has the authority to put different parts of the subsequent trust for sale. Stocks, bonds, real estate, heirlooms, jewelry, vehicles, are just some of the types of property qualified to sell.

Where do the funds go?

When an heir or beneficiary is disabled, this prevents them from taking care of themselves. This includes paying for expenses such as dental, medical, educational, and personal care. This also entails paying for any maintenance or rehabilitation costs – not to mention daily expenses such as food, shelter, utilities, and transportation. The trust can also go towards less essential things such as for hobbies, recreation, and travel.

The trust doesn’t always have to cover food and housing. However, there have been instances where the trust paid for those items. 

Professionally Managed Special Needs Trust

In many cases, it’s a logical decision to hire the services of a trust attorney, specifically one who’s experienced in setting up this type of trust.

Additionally, you can employ the services of an actual trust or financial company, non-profit organization, or a banking institution to manage and disperse the trust on your behalf.

However, professionally managed or pooled trust may include a stipulation that requires you to pass on the remaining assets to the organization you used as reimbursement for managing your trust.

Peace of Mind

Ensure that the future of your disabled loved one is protected with a special needs trust.

Establishing a special needs trust provides the peace of mind you need that your disabled beneficiary will be taken care of when the inevitable happens to you.

Pick the right trustee and make sure you create a valid trust, so the future of your disabled loved one is secure. Reach out to a trust attorney, so you have the professional legal guidance you need.

Daniel L. Fischer

As a Family and Divorce Lawyer practicing for more than 30 years, I sometimes handle other types of cases for longstanding clientele. I’ve been happily married to my college sweetheart for over 36 years. Together we have 6 grown children and 9 grandchildren that make our world go round.