Special Needs Trusts

Special needs trusts also referred to as “supplemental needs trusts” are a type of trust designed to prevent the beneficiary from being disqualified from government or other benefits due to the fact that they are the beneficiary of a trust.

A bit about trusts in general:  A trust is a special vehicle designed to hold assets and distribute them for the benefit of a person or persons.  Unlike any other type of entity like a corporation, a trust has no owners or shareholders.  There are three elements to any type of trust: 1.  The grantor who creates and funds the trust,  2.  The beneficiaries, and 3. The trustee.

In some cases, one person may serve in multiple roles.  All trusts are one of two types: a revocable trust or an irrevocable trust.  As the language implies, a revocable trust may be revoked or changed while an irrevocable trust may not be revoked or modified – with a few exceptions.  What makes a special needs trust different is a specific provision that the trustee MAY NOT make distributions to a disabled beneficiary for things that would otherwise be paid for by the government or other entity.  One example would be Social Security Disability.  Absent certain provisions a person could be disqualified from receiving benefits that are needs based (income and assets).  The goal of someone creating a special needs trust is to provide benefits to a disabled person that are above and beyond those that are provided elsewhere.  Some examples include clothing, travel, special types of assistance.  This list goes far beyond the scope of this article.

This type of trust is normally irrevocable and created by a will.  In some cases, a special needs trust may be created for a group of beneficiaries that are not disabled but could be.  In this case, the language is simply ignored if the person is not disabled, but it is there just in case.  The language required for a special needs trust is very specific and requires a higher degree of skill than other estate planning documents.

Some people decide to leave money for a disabled child (young or adult)  to someone else so it can never be counted against them.  This is dangerous as the person to whom the funds are given could spend or mismanage them.  Even if this third party is a trusted, highly responsible person, what happens if they become incapacitated, die, divorce or whatever?

For more information contact a qualified attorney or discuss your need with David Disraeli at 512-464-1110 or book a call here: