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Special Needs Trusts

Posted on in Estate Planning

Many people do not think about planning for their estate until they reach middle-age, but life is different for people with disabilities. Many people create trusts in their older age to clearly state what will be done with their money, assets and other belongings, along with funeral and death arrangements.

Special needs trusts provide for the needs of disabled people without creating a situation in which the disabled person loses government benefits such as Social Security and Medicaid. Special needs trusts appoint a trustee, just like any other trust, to be in charge of making sure everything goes correctly as stated in the trust.

The World institute on Disability has also helped to clarify a concern of many people who have a disabled family member. The government says that disabled people who receive government benefits cannot have trusts, however, a special needs trust does not belong to the special needs person.

The special needs person is only nominated as a beneficiary of the trust by the trustee, who establishes and administers the trust.

There are three types of special needs trusts:

Family-Type Special Needs Trusts:

For this type of trust, the parents provide the money and sometime purchase life insurance that will be paid into the trust. A living trust allows the people named in the trust to access the money before the "owner" of the trust dies. This type of trust is also good if any other relative wishes to contribute. The trick, though, is that this money cannot be used for housing, food or clothing, which should be covered by Social Security and Medicaid as basic needs.

Court Ordered Special Needs Trust:

Special needs trusts may be ordered by the courts if a disabled person inherits money or receives a court settlement. This requires a special trust because the person actually owns the money. Only a parent or legal guardian of the disabled person can set up this type of trust.

The disabled person must be under the age of 65 and meet certain standards set by Social Security in terms of his or her disability for this trust.

Pooled Special Needs Trust:

The third type of trust must be created by a non-profit association and can be added to by anyone, including the disabled person for whom the trust is set up. This is a large trust for many people, but each disabled person has his or her own account.

This may also be a simpler way to go, because the non-profit organization that sets it up does all of the necessary tax work, takes care of investment decisions, and functions as the trustee.

If you have a disabled family member and you are thinking of helping him or her to create a trust, consider speaking with an estate planning attorney for help. Attorneys at Stock, Carlson & Asso. LLC can help you set up a special needs trust today.

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