What Is a Special Needs Trust?

What Is a Special Needs Trust?

A special needs trust is a legal contract and fiduciary agreement that helps a disabled person earn income without compromising their eligibility for disability payments from Social Security, Supplemental Security Income, Medicare, or Medicaid.


A fiduciary appointed by the court manages most special needs trusts. Let’s dive deeper into the topic.


How Do Special Needs Trusts Work?


Special needs trusts cover the financial needs of a disabled individual beyond what’s covered by the public assistance programs. As long as the funds in the trust are not used toward any food or housing expenses, they do not count against applying for public assistance.


Hospital bills, caretaker fees, transportation costs, and other allowed expenses are typically used from this type of trust. Simply put, a special needs trust helps special needs individuals live a more fulfilled life by complementing their current government assistance. The recipient of a well-drafted special needs trust would collect federal services and still use contributions from the trust.


The program or trust creators designate a trustee to handle these trusts. The trustee oversees the management and distribution of all funds associated with the trust.


What are the Benefits of a Special Needs Trust?


Special needs trusts provide benefits to both the trustor and the beneficiary. This includes:


  1. The beneficiary may get financial assistance without jeopardizing their qualifications for income-restricted programs or facilities.
  2. The person or party who establishes the trust has some guarantee that the funds will be used for the purposes they specify.


Why Do People Typically Establish a Special Needs Trust?


The most common reasons for establishing a special needs trust include:

  • Putting money aside throughout your life to be used to take care of a special needs child when you die. Parents or guardians of special needs individuals are in a unique position. Since most parents are their children’s primary caregivers, even in adulthood, they worry deeply about their children’s future and who will take care of them once they are gone.
  • Well-intentioned family members sometimes make the mistake of passing their assets to a family member who is incapable of handling them effectively. This could put a vulnerable person at a disadvantage by undermining the assistance they get from government services. Grantors may steer planned inheritance or life insurance payments to a special needs trust to protect the beneficiary. You may invest money to increase a beneficiary’s quality of life without jeopardizing government monthly income or other benefits that could be their primary source of ongoing help.
  • A special needs trust can help preserve your family’s wealth. A trust arrangement is also helpful if you have a spendthrift beneficiary because it allows you to restrict the use of these funds. A special needs trust also aids in the proper distribution of wealth.


Contact Ensberg Law Group to Discuss Your Financial Plan


If you have a special needs individual who is the primary beneficiary of your financial assets, a special needs trust can give you peace of mind that they will be taken care of when you pass away. For a trustworthy probate lawyer in Covina, contact Ensberg Law Group for a free consultation.