What is a special needs trust? This legal document is a complex document, and drafting mistakes can have significant economic consequences for the intended trust beneficiary. To prevent such a problem, you should have an experienced elder care and asset protection attorney draft your trust agreement. A good lawyer will understand the complex nature of this type of estate plan and be able to advise you accordingly. Let’s take a look at the key aspects of this type of trust.
A special needs trust is an account set up for the benefit of a disabled person. Generally, a parent or grandparent establishes a special needs trust when leaving money to a child. If that child has a disability, the money is usually placed into this account. In some cases, the disabled person sets up a first-party SNT, which holds the disabled person’s money. If this option isn’t possible, a third-party trust can be used to manage funds.
While the use of trust funds can be varied, most of these funds are used to purchase goods and services for a special needs person. The trust funds are often used to pay for vacations, personal care attendants, home furnishings, out-of-pocket medical expenses, education, recreational activities, vehicles, and physical rehabilitation. The trust’s trustees are required to use extreme care when spending the funds. A special needs trust may also be used to provide funds to a special needs beneficiary.
While the money put into a special needs trust can cover supplemental needs that aren’t covered by government programs like Medicaid, it’s important to follow IRS guidelines and keep a detailed spreadsheet. When you make the decision to set up a special needs trust, it’s important to remember that you will be accounting for your money in the end, and you may want to involve a financial planner as part of your process.
The main benefit of establishing a special needs trust is that it can protect the disabled party’s eligibility for income-restricted government services. Furthermore, it can protect a beneficiary from the risk of financial abuse by ensuring that the funds are used for the intended purpose. Lastly, because a special needs trust is irrevocable, it can’t be dissolved by creditors or lawsuit winners. As long as the funds are kept in the trust, the disabled person won’t be able to access the money.
A special needs trust is an important legal document that enables a disabled person to receive income and cash benefits without a large amount of assets. It can also provide the funds that are necessary to maintain a higher quality of life. In addition, it can help a disabled person maintain an income and expenses that are common for those with disabilities. Furthermore, it won’t affect a disabled person’s eligibility for any public benefits. A special needs trust can be created by the individual with disabilities themselves, a parent, a guardian, or the court.
A special needs trust is a legal arrangement with a fiduciary relationship that allows disabled people to receive income without reducing their eligibility for public assistance disability benefits. A special needs trust allows a disabled person to access additional funding without risking their eligibility for government benefits. Therefore, it’s an increasingly popular legal strategy for helping people in need. It’s important to note that a special needs trust is an independent legal entity and shouldn’t be confused with an IRA or other retirement account.