Trusts are common, yet important estate planning tools that are typically used to set aside money for a beneficiary, while indicating exactly how and when the assets can be used. A common example would be a parent putting aside money in a trust for his or her children which they can only receive once they reach a certain age. The way it works is, a “trustee” is chosen by you to hold the property and be responsible for fulfilling the terms of the trust, until the assets are relinquished to the beneficiary.
What is Special about a Special Needs Trust?
Different trusts are created for different purposes. A Special Needs Trust is one particular type of trust created for the benefit of someone disabled or who has “special needs.” A Special Needs Trust is irrevocable, which means it cannot be arbitrarily canceled and the assets will not be subject to creditors. The importance of having a Special Needs Trust comes when the caregiver of the disabled no longer has the ability to continue providing care. The trust, if properly established, can ensure that continuity of care.
General Support vs. Supplemental Care
Special Needs Trusts are usually one of two types. The first is the General Support Special Needs Trust, which is used to provide the primary source of benefits for the disabled individual. The disadvantage of this type of trust is the potential for interfering with eligibility for need-based government assistance, such as Medicaid or Supplemental Security Income (SSI).
The most commonly used Special Needs Trust is the Supplemental Care Special Needs Trust. This type of trust is considered a secondary source of support after government benefits have been exhausted. This type of trust does not usually interfere with eligibility for government benefits.
How Do I Create a Special Needs Trusts?
Special Needs Trusts can be created or funded in different ways. For example, a Family-Type Special Needs Trust is funded by the parents or family members of the disabled individual through their wills or a life insurance policy with the disabled person named as the beneficiary. Families can also fund the trust through a “living trust” which becomes effective immediately. However, it is important to remember that, the money set aside in a Family-Type Special Needs Trust cannot be used to purchase food, clothing or housing for the beneficiary. Otherwise, eligibility for government benefits may be compromised.
In some situations, a Special Needs Trust will be ordered by the court when a disabled person inherits money or receives a court settlement. A Pooled Special Needs Trust is a unique type of trust that is administered by a nonprofit organization, which holds the assets of several beneficiaries. Those assets are pooled together (hence, the name) and invested as a common fund. However, the accounts for each beneficiary remain distinct for distribution purposes.
Special Needs Trusts are generally very complicated legal documents that require specific language in order to properly convey and achieve the purpose of the trust. Consulting an experienced estate planning attorney to assist in creating a Special Needs Trusts in Fayetteville Arkansas is a wise decision.
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