A trust is a legal document that holds an individual’s (the trustor’s) income, assets, or any other valuable assets to one day be transferred to a designated third party, referred to as the beneficiary. A special needs trust is set up to ensure an individual with special needs has an opportunity for a strong quality of life when his or her parent, guardian, or legal caretaker eventually can no longer do so. Every special needs individual who is unable to provide for themselves of their own will at some point requires a trust. It’s incredibly important for special needs parents and guardians to take a proactive approach to establish long-term care.
What Are the Different Types of Special Needs Trusts?
There are many different types of special needs trusts that can be established to benefit a special needs individual.
A first-party special needs trust is set up by an individual with special needs and is funded entirely by his or her personal assets and income. These assets are put aside for the individual’s personal use only. This type of trust is typically utilized by an individual who becomes disabled after an injury and has been able to sustain work for an extended time before becoming disabled. When an individual uses a first-party trust, they do not revoke their eligibility for Medicaid or SSI government financial assistance in the future.
A third-party special needs trust is most frequently used by families with special needs children. These trusts hold any type of asset a parent may have – real estate property, housing, cars, stocks, and even gold or fine jewelry. This is a popular option among the average family, because it leaves the special needs child open to the availability of receiving Medicaid or SSI insurance later in life. A third-party special needs trust does not bar the individual from being applicable for government assistance in the future, should they need it. Many special needs individuals go into adult or group homes when they become elderly. These homes can cost upwards of $8,000 a month, requiring the individual to seek government assistance to pay. With a third-party trust, the special needs child (the beneficiary) is not required to pay back any unused funds and can pass them further along to future generations or beneficiaries if so desired.
Another type of special needs trust is a pooled trust. A pooled trust is established by a non-profit organization. Many individual beneficiaries with special needs “pool” the totality of their assets. This pooled trust can make more stable investments and can offer more management services than a more traditional trust. The most appealing benefit of utilizing a pooled trust is that beneficiaries of the trust are not deemed ineligible to apply for Medicaid, SSI, or any other type of government financial assistance in the future. As always, the smartest option is to speak with a special needs planning lawyer to determine which type of trust is best for you and your family.
Discuss your options with Amicus Law Firm today to take a proactive approach to provide long-term care for yourself or a loved one.