What is a special need trust?
A special need trust, also known as a supplemental needs trust, is a legal arrangement designed to provide financial support to individuals with disabilities or special needs without affecting their eligibility for government benefits. These trusts are created by parents, grandparents, or other individuals to ensure that the person with special needs can maintain their quality of life while still receiving necessary government assistance. In this article, we will explore the purpose, benefits, and key aspects of special need trusts.
The primary purpose of a special need trust is to provide additional financial resources to a person with special needs without disqualifying them from receiving government benefits such as Supplemental Security Income (SSI) or Medicaid. These benefits are crucial for individuals with disabilities, as they help cover essential expenses like healthcare, housing, and transportation. However, government programs often have strict income and asset limits, making it challenging for individuals with special needs to accumulate savings or receive gifts without losing their eligibility.
Benefits of a Special Need Trust
1. Preservation of government benefits: By placing assets in a special need trust, the person with special needs can maintain their eligibility for government benefits while still having access to additional financial resources.
2. Flexibility in management: Trusts can be structured to allow for the distribution of funds for various purposes, such as education, medical care, or leisure activities, as determined by the trust creator or a designated trustee.
3. Long-term planning: Special need trusts can be established for the lifetime of the person with special needs, ensuring that they have financial support throughout their entire life.
4. Protection from creditors: Assets held in a special need trust are typically protected from creditors, ensuring that the person with special needs’ financial resources remain secure.
5. Tax advantages: Certain types of special need trusts may offer tax benefits, such as avoiding estate taxes or reducing the taxable income of the trust beneficiaries.
Key aspects of a special need trust
1. Trustee: A trustee is responsible for managing the trust and distributing funds as needed. The trust creator can appoint themselves as trustee or choose someone else, such as a family member or professional fiduciary.
2. Trust agreement: The trust agreement outlines the terms and conditions of the trust, including the purpose of the trust, the distribution of funds, and any other provisions.
3. Distributions: Trust funds can be distributed to the person with special needs for their benefit, but the distributions must be made directly to third parties (e.g., healthcare providers, educational institutions) to avoid affecting their eligibility for government benefits.
4. Termination: A special need trust can be terminated upon the death of the person with special needs, the achievement of a specific goal, or other triggering events as outlined in the trust agreement.
In conclusion, a special need trust is a valuable tool for providing financial support to individuals with disabilities or special needs while preserving their eligibility for government benefits. By understanding the purpose, benefits, and key aspects of these trusts, individuals and families can make informed decisions about their financial planning and ensure that their loved ones with special needs are well cared for.
