Types of Special Needs Trusts

Posted by Radmin on June 29th, 2019

There’s nothing relatives want more for their family members with impairments than stability. A special needs trust (SNT) is the ideal investment to ensure they’re well taken care of throughout their life.

A trust is an arrangement where a person or institution manages funds and assets for a beneficiary. An SNT works in tandem with SSI and Medicaid because the beneficiary doesn’t own the assets held in this trust. It’s used as a supplement to government benefits for things like care companions or dental benefits not otherwise covered.

Are you thinking about getting a plan for a loved one with a disability? Read on to learn more about the types of special needs trusts:

Self-Settled

The first type, also known as a first-party trust, is funded by the beneficiary's assets. When a disability was caused by tort actions, the victim's compensation counts as an asset. They can use their injury settlements to finance this trust. Their allowance from SSI or Medicaid is also their property, meaning they're allowed to use it as payment for their grants.

However, recipients don't have direct access to their funds. An authorized trustee will manage their money on their behalf. If the beneficiary passes or there is a termination of the trust, the state will reclaim the remaining wealth. This serves as a payback to the government assistance that they previously received.

Third-Party

For example, a family wants to leave an inheritance to their relative with a disability. Giving it directly to the recipient may cause them to temporarily lose their government benefits. They may only qualify for them again when they've exhausted the money.

To maximize the funds, it's recommended to invest in a special needs estate plan. Unlike the first SNT, this one is more flexible. The donors of the trust aren't limited to the inheritor's immediate family. If other relatives, friends, or organizations want to pitch in, they're free to do so. Aside from that, they can also choose when and how this inheritance will go into effect.

Another advantage of this type is that the state won't require any payback. If the inheritor passes away, the excess funds will be distributed within the family.

Planning for your beneficiary's financial security can be overwhelming. Don’t worry; there are experts you can lean on for advice regarding these matters. Consult a special needs trust settlement provider to find the right plan for your relative.