Trusts are typically straightforward – they are arrangements in which a third party holds assets on behalf of someone else. A special needs trust is a bit more complex.

Also known as a discretionary trust, a special needs trust provides for the needs of a child or adult beneficiary who has a disability. The main advantage of a special needs trust (SNT) is that it allows the beneficiary to hold cash and other valuable assets without becoming ineligible to receive help from public assistance benefits. As with other types of trusts, an SNT also helps the beneficiary lead a more stable, predictable, and happier life.

6 Fascinating Facts about a Special Needs Trust

1. A special needs trust can help provide a disabled child or adult financial stability, without compromising their ability to receive public assistance benefits

Many disabled adults and children rely on Social Security Insurance (SSI) and Medicaid to pay for their medical care – without these public assistance benefits, disabled individuals risk significant financial distress. Unfortunately, many public programs have limits on how much income a person can make monthly. If they make too much money, they will lose their benefits.

A special needs trust allows the disabled child or adult to continue receiving public assistance benefits along with financial disbursements from the trust.

2. There are two types of special needs trusts

Estate planning attorneys categorize special needs trusts according to how the trusts are funded.

• First-party SNTs – the beneficiary owns the assets or is legally entitled to the assets that fund a first-party SNT; the beneficiary may have gained the assets from an award or settlement
• Third-party SNTs – the assets funding third-party SNTs belong to someone other than the beneficiary

3. A number of assets can be used to fund a special needs trust

A Special Needs Trust can hold almost any type of asset, including cash, securities, property, and life insurance proceeds.

4. An SNT is more than a document – there is a human behind every important decision

A person, known as a trustee, decides how and when to disburse the money to the beneficiary. They must make wise decisions to be sure that the disbursements do not disqualify the beneficiary from receiving government benefits.

5. If you have a special needs trust, you won’t have to disinherit your disabled child

Only people with less than $2000 and couples with less than $3000 are eligible for SSI. Medicaid also restricts income. To ensure that their disabled children can continue receiving public assistance benefits, people without a special needs trust sometimes must make the difficult decision to deny their child an inheritance. A special needs trust supplants, or replaces, the need for disinheritance.

6. An SNT trustee makes a variety of important decisions

Depending on the terms in the SNT, the responsibilities of the trustee may include:

• Correctly distributing the trust’s money includes investing the trust’s money
• Investing the trust’s money in ways that benefit the trust
• Keeping records
• Providing an account to the beneficiary

Contact Charles D. Stark For More Estate Planning Questions

For guidance on special needs trusts, consult with Charles D. Stark. Our estate planning attorney in Sonoma County can help you create a special needs trust that provides long-lasting benefits to disabled children and adults.