If you have a loved one with special needs, you may wish to create a special needs trust for that person’s benefit. An individual with special needs may be eligible for government assistance, but too many assets or too much income can disqualify him or her from receiving those benefits. By transferring assets to an irrevocable special needs trust, you can provide support for your loved one in a manner that will not jeopardize his or her eligibility for government assistance.
|Type||Created By||Funded With||Description|
|Third Party||Family member or friend of person with special needs||Third party's assets||Can be created as a standalone document or through an individual’s last will and testament or revocable living trust.|
|Self-Settled||Person with special needs, family member or friend of person with special needs, or the court||Beneficiary’s assets||Commonly used when a person with special needs acquires assets through a personal injury award, retirement plan, divorce settlement, life insurance policy, or inheritance. Upon the death of the beneficiary, the trust must pay back a portion of any government assistance he or she received.|
|Pooled||Non-profit organizations||Third party’s assets or beneficiary’s assets||Created to expertly and efficiently administer a master trust on behalf of individuals with special needs. Each pooled trust is unique with its own fees and available services. Funds are used to provide for beneficiaries in proportion to their share of the total amount. Upon the death of the beneficiary, the trust must pay back a portion of any government assistance he or she received.|
Special needs trusts are designed to supplement any government assistance the beneficiary receives. Government assistance programs generally provide for the food and shelter of a person with special needs, so a special needs trust cannot provide for these things. Instead, the trustee of a special needs trust may make distributions to provide for the beneficiary’s supplementary needs, including (but not limited to) home furnishings, education, vehicles, entertainment expenses, computers, books, and vacations. The trust can also provide for medical expenses not covered by government assistance, including over-the-counter medications, experimental medical treatments, nurses, and out-of-pocket medical and dental expenses. Distributions should be made by the trustee directly to a third party so that the distributions are not considered income to the beneficiary.
There are complex legal issues involved with the administration of a special needs trust. The trustee is responsible for evaluating the needs of the beneficiary and making distributions in a manner that will preserve the beneficiary’s government assistance. The trustee must also file annual tax returns for the trust while maintaining accurate records and overseeing the investment of trust assets. Because these tasks may be difficult for an individual without legal, accounting, and financial experience, if you are not considering a pooled special needs trust, you may want to appoint a corporate trustee, such as Stifel Trust Company.
If a beneficiary passes away, no longer needs government assistance, or no longer qualifies for government assistance, third-party and self-settled trusts will terminate and the assets will be distributed according to the terms of the trust. Accordingly, you should designate beneficiaries to receive trust assets upon the termination of the trust. Pooled trust assets will be distributed according to the provisions of the master trust. Prior to any other distributions being made, a self-settled special needs trust and a pooled trust must pay back a portion of the government assistance received by the beneficiary.
If you are interested in creating a special needs trust, you should consult with a local estate planning attorney who has experience in the areas of disability and government benefits.
|Special Needs Individual|
| SPECIAL NEEDS TRUST DISTRIBUTIONS FOR SUPPLEMENTARY NEEDS
||GOVERNMENT ASSISTANCE FOR BASIC NEEDS
Trust services are provided by Stifel Trust Company, N.A. and Stifel Trust Company Delaware, N.A. (Stifel Trust Companies), wholly owned subsidiaries of Stifel Financial Corp. and affiliates of Stifel, Nicolaus & Company, Incorporated, Member SIPC & NYSE. Unless otherwise specified, products purchased from or held by Stifel Trust Companies are not insured by the FDIC or any other government agency, are not deposits or other obligations of Stifel Trust Companies, are not guaranteed by Stifel Trust Companies, and are subject to investment risks, including possible loss of the principal invested.
Stifel does not provide legal or tax advice. You should consult with your legal and tax advisors regarding your particular situation.