If you have a loved one with special needs, it’s important to plan for their future. A special needs trust can be a great option, and it’s not as difficult to set up as you might think.
What is a special needs trust (SNT)?
A special needs trust is a type of trust that allows you to provide for a loved one with special needs without jeopardizing their eligibility for government benefits. There are two types of special needs trusts: first-party special needs trusts and third-party special needs trusts.
A first-party special needs trust is used when the person with special needs is the one funding the trust. The money or property in the trust can be from any source, but most often, it comes from a settlement or judgment in a personal injury lawsuit.
A third-party special needs trust is used when someone other than the person with special needs, usually a parent, grandparent or another family member, wants to leave money or property to that person. The funds in this type of trust can come from any source, but they are often inheritance money or life insurance proceeds.
How can you create a special needs trust?
You can create a special needs trust yourself or with the help of an attorney who understands your special estate planning needs. If you choose to do it yourself, the first step is to find a trustee. The trustee is the person who will manage the trust and make sure the money is typically used for the special needs of your loved one. Once you’ve chosen a trustee, you’ll need to draft a trust document. This document will list the special needs of your loved one and how you want the money in the trust to be used.
You’ll also need to fund the trust. That means transferring any money or property you want to go into the trust into the trustee’s name. Once the trust is adequately funded, the trustee will be able to start using it for your loved one’s special needs.
This process may seem daunting, but it doesn’t have to be – if you do everything right. Just make sure that the trust meets all the requirements set forth by your state and the federal government. The trustee also needs to be someone you trust to make good decisions about how to use the money in the trust.