What is a Special Needs Trust?

August 12, 2020

Special needs trusts are specialized tools that provide future financial support for disabled children and adults. They can be set up by caregivers, friends, or relatives who want to leave money and property to their loved ones. These trusts allow people with special needs to obtain necessary funds to live comfortably.

Special needs trusts are also useful because they do not jeopardize the beneficiary’s eligibility to receive public benefits, like Supplemental Security Income (SSI), Medicare, and Medicaid. These funds are also protected from claims by creditors, such as landlords and credit card companies.

Who is Eligible for a Special Needs Trust?

People with permanent special needs or disabilities who currently qualify for governmental benefits and cannot manage their own finances may qualify.

If someone owns their own home, vehicle, and other personal property, this will not affect their SSI or Medicaid eligibility.

How Do I Establish a Special Needs Trust?

These trusts can be arranged with the help of a qualified wills and estates lawyer. Once the trust is set up by the grantor, it establishes a fiduciary relationship between the disabled person and an assigned person who will act on their behalf.

The loved one will not have control over the trust, but one or more trustees can be chosen. These can be family members or independent trusted professionals who will have authority to spend money on the loved one’s behalf. The trust will come to an end once it is no longer needed, which happens when the funds have been exhausted or when the beneficiary passes away.

What are the Different Types of Special Needs Trusts?

There are different types of special needs trusts, and each must comply with estate planning laws and regulations.

A self-settled or a first-party special needs trust is an option when the beneficiary has received an inheritance outright, a court-mandated settlement, or owned property prior to becoming disabled. Having a first-party special needs trust will protect their assets if they need to become eligible for public benefits that have specific income limitations.

Parents who have disabled children, and others planning for a disabled loved one’s future, often choose third-party special needs trusts. These are set up by parties other than the beneficiaries and frequently use independent trustees. The grantor also controls what happens to any remaining funds after the beneficiary’s death.

How Does a Special Needs Trust Work?

The designated trustee is not allowed to give the trust money directly to the beneficiary since this could interfere with their SSI and Medicaid eligibility. Instead, the trustee can withdraw the assets to purchase the loved one’s goods and services, like education, out-of-pocket medical and dental expenses, physical rehabilitation, personal care attendants, recreation, and vehicles.

In situations where the assets are more modest or there is no good trustee candidate, a pooled trust may be an option. These special needs trusts are managed by non-profit organizations. They accept funds from many families and invest them. Each beneficiary has their own account, and the chosen trustee manages and spends the money for them.

If a person is interested in pursuing a special needs trust, it is important to contact an experienced lawyer. Setting up a trust can be complicated, so it is important to contact legal counsel right away to ensure that the process goes smoothly.

Chester County Wills and Estates Lawyers at Eckell Sparks Help Families Prepare for the Future

If you are interested in creating a special needs trust for a loved one, turn to one of our skilled Chester County wills and estates lawyers at Eckell, Sparks, Levy, Auerbach, Monte, Sloane, Matthews & Auslander, P.C. today. Contact us online or call us at 610-565-3701 for a free consultation. Located in Media and West Chester, Pennsylvania, we proudly serve clients throughout Delaware County, Chester County, Montgomery County.