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Family Services: TRUST
SPECIAL NEEDS TRUST
Millions of families in the United States have at least one family member with special needs. Special needs includes, but is not limited to, disabilities caused by accident or injury such as paralysis, visual and/or auditory impairment, or permanent mental disorders.

A special needs trust allows a person with disabilities to receive benefits from governmental programs, such as Supplemental Security Income (SSI) and Medicaid while also having another source of funds to pay for additional benefits the government programs do not provide. A special needs trust also conserves assets to provide a "cushion" in the event that public benefits are ever reduced or eliminated in the future.

The trustee of a special needs trust must be extremely careful to use the funds in the trust so that the person's eligibility for the benefits from the government programs such as SSI and Medicaid are not affected.

There are two kinds of special needs trusts:

1) Self-Settled Trust. This trust is funded with the disabled person's own assets. When the disabled person dies, any remaining funds in the Self-Settled Trust must be used to repay the state for any Medicaid benefits the person received during his or her lifetime. The advantage of this type of trust is that it allows the Trustee to conserve assets of the beneficiary while at the same time immediately qualifying the beneficiary for all public benefits for which the beneficiary can medically qualify. The disadvantage, of course, is that upon the beneficiary's death any remaining funds will need to be used to pay off the Medicaid lien and this can conflict with family wishes that the remaining money benefit family members, charities, etc.

2) Third-Party Trust. This trust is funded with assets from someone other than the disabled person, such as a parent, that can be created in a will, revocable living trust, or a stand alone trust. The benefit of this type of special needs trust is that If funds remain following the death of the disabled person, they do not pass to the state but instead or distributed to the remainder beneficiaries chosen by the person who created the trust. However, the disadvantage of the Third-Party Trust is that it cannot be created with any property which belonged to the disabled beneficiary. Such property must be placed in a Self-Settled Trust.

Since both trust types having their advantages, Investors Independent Trust Company often recommends that a comprehensive plan will require both trusts.

Revocable Living Trust

Marital Trust

Family Trust

Generation Skipping Trust

Dynasty Trust

Life Insurance Trust

Charitable Trusts

Special Needs Trusts

 

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