Trusts are an important part of protecting a person’s assets. For disabled individuals or their caretakers, you may benefit from establishing a unique type of trust called a special needs trust (SNT). If you or a loved one is disabled, here is what you need to know about special needs trusts.

What is a Special Needs Trust?

An SNT is a trust document that protects a disabled person’s ability to receive government benefits even if they exceed asset limits that would prevent them from doing so otherwise. The SNT trust funds often help cover costs that are above and beyond that which is covered by public benefits.

Important Terms to Know for a Special Needs Trust

  • First-Party Special Needs Trust: This type of trust document is funded by the disabled person’s own assets and established by a legal guardian or court.
  • Third-Party Special Needs Trust: This type of trust can be established by someone other than the disabled person, often a parent or other family member.
  • Pooled or Community SNTs: These types of trusts are run by a nonprofit organization that “pools”  and invests funds for many beneficiaries, spending trust assets on their behalf.
  • Grantor: The person who created and funds the trust. Specific to SNTs, the grantor is either the beneficiary (first-party SNTs) and funds the trust with his/her own money, or the grantor is someone other than the beneficiary (third-party SNTs), often a family member.
  • Trust: Legal contract that holds and manages the assets of a person or financial institution
  • Trustee: The person or institution who manages the trust.
  • Beneficiary: The person for whom the trust is established. Specific to an SNT, the trust beneficiary is classified as disabled by the Social Security Administration.
  • Remainder Beneficiary: The individual(s) or entities who receive any remaining assets after the original beneficiary’s death.

Setting Up a Special Needs Trust

If you have determined that an SNT is the best choice for your family, it is time to consider the details of that process. One of the most important parts of establishing an SNT is assembling a team that is knowledgeable and cares about the needs of your SNT beneficiary. This will likely include attorneys, financial planners, and relevant family members or invested parties.

Protecting the needs and quality of life for people with disabilities is important, particularly given the financial resources they may have without the ability to manage on their own. When determining how to fund the SNT, it is important to consider the characteristics of the disability and the current and potential future medical expenses required.

Trusted attorneys and financial advisors can help you determine how to set up, fund, and manage the SNT. If you would like to discuss your specific circumstances related to a special needs trust or to consider additional options for your loved one’s care, please contact our knowledgeable attorneys.