Special Needs  Trusts

If you have a relative with special needs and are worried about his or her ability to manage money, or if you want to make sure that your loved one is cared for after you are gone, then a special needs trust may be for you.  Although many people have heard of a “special needs trust”, they may not know that there are many different types of trusts that fit this description – there is no one “special needs trust”.  In general, a special needs trust is a trust that is designed to hold funds for the benefit of a person with special needs.  The funds in the trust are supposed to supplement, but not usually supplant, the beneficiary’s government benefits.  If a special needs trust is properly drafted after an in-depth consultation with one of our experienced special needs planning attorneys, it will allow the beneficiary to maintain his or her public benefits with much greater flexibility for the future. 

There are three main types of special needs trusts that each meet a slightly different need.  The most well-known type of trust is called a “third-party” special needs trust because it is created and funded by a person who is not the recipient of government benefits.  In most cases, the parents or other family members of a person with special needs will set up this kind of trust.  Once created, the trust can be fully funded immediately and the funds can be used for the benefit of the person with special needs’ at once.  On the other hand, you can fund a special needs trust at death so that there are funds available for your loved one after you are gone.

The other main type of special needs trust is called a “first-party” special needs trust, because it is funded with the beneficiary’s own assets.  These trusts are often used when a person with special needs receives a personal injury settlement, an inheritance in his or her own name, or when a previously healthy individual is injured and develops special needs.  If properly drafted, a first-party special needs trust can still allow the beneficiary to qualify for government benefits, but with a catch – in most cases, when the beneficiary passes away, the funds left in the trust are used to repay the government for the cost of the beneficiary’s care. 

There is a third type of special needs trust, called a “pooled” special needs trust, that is not as common as the first and third party trusts.  A pooled trust is created by a non-profit organization and is funded with the assets of multiple beneficiaries.  Each beneficiary has his or her own account with the pooled trust, and the funds in that account can be used for the beneficiary’s special needs.  Often, pooled trusts will provide other services for the beneficiary, like care management and accounting.  Upon the beneficiary’s death, a portion of the funds in the pooled trust are used to further the non-profit’s mission.

As you can see, there are many types of trusts that can be used to help someone with special needs.  If you or a family member is thinking about leaving money to a person with special needs as part of your estate plan, a special needs trust will be an essential component of that plan.  Brown & Brown’s special needs planning attorneys will be happy to help you create a trust, or trusts, that fit your family’s needs.