If you are the parent of a disabled child, or if you help support a loved one with special needs, a special needs trust can be an effective – even essential – tool. Special needs trusts help to ensure that your loved one’s Medicaid or Supplemental Security Income won’t be jeopardized by an inheritance or, in the case of a disability caused by someone else’s actions – by a personal injury settlement.
Strict Rules
In order for a special needs trust to protect a disabled person’s benefits, the trustee appointed to manage the trust has to follow some pretty strict rules. Trust funds can only be used for specific purposes, and failure to follow the rules can mean that a beneficiary loses much-needed public benefits.
Who Should Serve as Trustee?
When you have a family member or friend who is trustworthy, capable of effectively managing a special needs trust, and willing to do so, there’s not much to worry about. But what if no one close to you fits that description? Often, families choose an institution, like a bank, to serve as trustee. This works out well for many families, but for some, the administrative costs can be too high or the trustee can seem less-than-responsive.
How a Pooled Trust Can Help
In this situation, a special kind of trust, called a pooled special needs trust, can be an effective option. A pooled special needs trust is run by a nonprofit organization, with a board of directors made up of volunteers. It’s called a “pooled” trust because the funds of several different beneficiaries are combined to provide for greater investment potential. However, even though trust funds are pooled in this manner, each beneficiary has a separate, individual sub-account. A pooled special needs trust can offer a number of advantages, including:
- Lower administrative costs than a traditional institutional trustee
- Administration of trust assets by people who are knowledgeable about the special needs trusts, and sensitive to the unique needs of their beneficiaries.
- Often, there’s no minimum required contribution
Which type of special needs trust is right for you and your family? A qualified estate planning attorney can help you determine this.
Stephen A. Mendel, Estate Planning Attorney
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