What is a special needs trust?
Many people know someone who has special needs. That means they have a disability (either physically or mentally) and require additional help and support. A trust in business is a relationship which gives the trustee the right to hold on to possessions or resources for the beneficial party. So, you may ask yourself what is a special needs trust?
Special needs trust options
It is also known in some jurisdictions as a supplemental needs trust, a special needs trust is set up so you can leave the property directly to your loved one with special needs. A trust written properly, also allows your beneficiary to receive funds from the trust while receiving government benefits. The government assistance programs that your special needs loved one can qualify for include, subsidized housing, Supplemental Security Income (SSI), vocational rehabilitation and Medicaid. The special needs trust is also a great idea because it ensures that your disabled loved one will be taken care of properly and their precise needs will be addressed. There are three types of special needs trusts to consider. They are:
- The first-party trust- this is funded with assets belonging to the beneficiary. If the person is under 65, considered disabled and currently receives government assistance, this may be a good option. This type of trust is usually set up by a parent or guardian.
- Third-party trust- unlike the first-party trust, this trust is funded with assets owned by the parents or relatives, not the beneficiary. The trust will also allow the beneficiary to qualify for needs-based government programs. It also ensures that your loved ones medical needs will be taken care of once the parents pass away.
- Pooled trust- this type of trust is managed by a nonprofit organization. The assets are pooled for investment with a sub-account managed by the nonprofit organization for the beneficiary.
Special needs trusts can offer piece of mind that your loved one with special needs will be taken care of once you pass away. If you decide to leave a trust for your loved one, it is good to know about the possibilities.