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What is a special needs trust?

A special needs trust is a very effective estate planning tool for to provide economic security for individuals who are mentally or physically disabled. Essentially, creating a trust allows a trustee to oversee the beneficiary’s finances and the trust usually lasts until the beneficiary’s dies or the funds in the trust run out.

A special needs trust is set up to suit the individual needs of the beneficiary. Typically, the trustee uses the funds to pay for necessities and other expenditures for the beneficiary, which is helpful when the beneficiary is not able to manage his or her own finances. A trustee can be a trusted family member or a third party who is appointed by the court. 

One of the biggest perks to a special needs trust is that is can be effective at allowing the disabled beneficiary to still qualify for government assistance programs like Medicaid and Social Security. The government does not consider assets that are in trusts when determining eligibility for assistance programs.

In order to stay qualified for the government benefits, though, it’s important that the trustee make purchases for the beneficiary instead of giving money from the trust to the beneficiary, which could disqualify the beneficiary from being eligible for government benefits.

Even in situations where disabled individuals do not need to apply for government assistance programs, a special needs trust can still be beneficial, as explains in an article on the topic. Plus, it’s never a good idea to rule out the possibility that the disabled individual might need government assistance sometime in the future.

For more information on this important estate planning tool, please visit our page on Special Needs Trusts.

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