Many people presume that trusts are simply a way for upper-crust families to preserve their wealth. In fact, trusts can be designed for many purposes, and help many types of individuals and families.
There is a type of trust specifically for people with special needs that can provide for their financial needs, while also preserving their eligibility for certain government benefits.
Special needs trust
A special needs trust is created by one person for the benefit of another person with special needs. Special needs are defined under Social Security Administration guidelines and include physical or mental impairments that prevent the person from participating in substantial, gainful activity.
A special needs trust can be created for someone of any age, but often is used for people who have a lifelong disability or medical condition that will require ongoing care.
Asset management
The assets in the trust are managed by a trustee. It is important to choose a responsible person to manage the trust and the document must contain specific instructions on how the trust assets should be managed. Some people choose to have a friend or professional to serve as trustee.
This person is responsible for making distributions from the trust for the beneficiary’s needs. This might include housing, education, medical expenses, and payments for other necessities. The funds in the trust can come from cash, investments, real estate or other assets.
A special needs trust is meant to supplement government benefits, not to replace them. It is structured in a way that the beneficiary does not receive the assets directly, which could prevent them from qualifying for government benefits.