What is a Special Needs Trust?

Estate Planning Lawyer Phoenix, AZ

A special needs trust, also known as a supplemental needs trust, is a way to help take care of your disabled loved.

What is a Special Needs Trust?

A special needs trust is an irrevocable trust that is a structured, long-term financial plan for a minor or someone living with a disability. For those who are physically or mentally challenged, the special needs trust allows the beneficiary to use the property held in the trust for their benefit without forfeiting any government assistance. The trust holds and protects financial assets for the benefit of the disabled beneficiary. The trust can also receive contributions from a variety of sources, like gifts from family members.

Special Needs Trust Requirements

Both the Federal government and many states have established statutes that govern the creation and execution of a special needs trust. In addition, State Medicaid Programs, as well as Social Security, may have specific guidelines or requirements for special needs trusts.

Creating a Special Needs Trust

You can set up a special needs trust on its own for the beneficiary, or incorporate one into your own estate planning. Sometimes, when a beneficiary of a will or trust is disabled, it may disrupt that person’s government assistance. However, if the distribution is directed into a special needs trust, that beneficiary’s assets can remain protected and still receive government assistance.

In creating the special needs trust, the grantor will need to name the trustees. This is the person(s) or entity that will be responsible for the management and administration of the trust.

Funding a Special Needs Trust

After creating the special needs trust, it will need to be funded. After obtaining an EIN (tax identification number) from the IRS, the trustee can open a bank account in the name of the trust and deposits may be made into that account.

Special Needs Trust Property

A special needs trust may also contain property other than cash. Like a living trust, assets such as real estate, stocks, vehicles, jewelry, etc. can be held by a special needs trust. However, since a special needs trust is often set up to provide a cash flow to a beneficiary who otherwise would not have the ability to do so, the trustee of a special needs trust may be authorized to sell the trust’s tangible items to raise cash.

Terminating a Special Needs Trust

A special needs trust will end when it is no longer needed. This might occur if the beneficiary dies, is no longer eligible for government benefits, or when the trust funds are depleted.

If you are interested in creating a special needs trust for a loved one, contact an experienced attorney. There are a lot of details that go into a special needs trust, like statutory requirements and tax considerations, to make the trust work effectively. The estate planning attorneys at Kamper Estrada, LLP can create a special needs trust that is an effective tool for your family.

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