3 Common Types of Special Needs Trusts
Posted by rjgp1 on May 17th, 2019
In general terms, trust funds are designed to provide care and resources to the living when a loved one has passed on. Few populations can benefit more from trust funds than those who are living with special needs. In some cases, when a beloved caretaker passes away, it can create chaos and worry for special needs survivors.
Therefore, there a special needs trust fund can help provide for those who may need additional support when a caretaker passes away. These trust funds include special accommodations that are needed to properly provide for the care and maintenance of special needs survivors. Some are also used to protect access to public assistance for special needs individuals who have inherited assets or received a court settlement. Special needs trust funds come in three primary types, which are first-party, third-party, and pooled special needs trust funds. Special needs trust advisors can help you decide which designation best corresponds to your circumstances. In the meantime, read on to learn more about the two types of special needs trust funds.
Third-Party Special Needs Trust Fund
A third-party special needs trust fund is commonly used when the special needs beneficiary is cared for by another person. In other words, the property and estate of the third-party caretaker is used to fund the trust for the beneficiary. They can be set up well in advance of the need by the third-party as part of a last will and testament. For example, parents of special needs individuals will often set up a special needs trust for use in caring for their special needs child in the event of parental death. Such trusts can be drafted as part of a living will to avoid probate, or they can be established as a stand-alone trust. The living will trust is only created upon the death of the third-party creator, while a stand-alone trust can be in existence prior to death to allow for multiple contributors to finance it. For example, if a special needs trust for a child will be funded not only by parents but by grandparents, aunts, uncles, and siblings, a stand-alone trust provides a mechanism for such contributions. One of the primary benefits of such a trust is that if it is governed by a trustee other than the beneficiary, there are protections in place that would maintain any public assistance benefits the beneficiary receives such as SSI.
First-Party Special Needs Trust Fund
A first-party trust is used primarily to protect access to public benefits for special needs beneficiaries who may come into money through financial events such as inheritance or settlements. It can also be used when someone who was previously not disabled owns considerable assets and later becomes disabled. Putting those assets and funds in a special needs trust can allow the beneficiary to qualify for public assistance. The terms of first-party special needs trusts are governed by federal law, so there are some statutory requirements that must be met. For example, they can only be created for beneficiaries who meet the government definition of disabled, and they require that the beneficiary is under the age of 65 when the trust is created.
Pooled Special Needs Trust Fund
A derivation of special needs trust is the pooled special needs trust. It allows for the combination of assets of a beneficiary to be placed in a pool that is then used to support many special needs beneficiaries. It is administered by a trustee that is a non-profit organization. Pooled trusts can be created in third-party or first-party formats. Each beneficiary has a separate account of assets, but the assets are pooled by the administrator for the purposes of investment and financial management.
A special needs trust fund, regardless of the type, can provide care and protection for those with special needs. They can be used to protect assets while allowing access to public assistance or provide caretakers with a way to provide for the needs of special needs individuals following caretaker death.Also See: Special Needs, Needs Trust, Trust Funds, Third Party, Trust, Special, Party
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