If you want your loved one with special needs to enjoy a better quality of life, a Special Needs Trust might be the answer.
There are different trusts for different circumstances, but all allow the beneficiary to continue receiving essential government benefits.
Supplemental Security Income, or SSI, assists people with special needs. To qualify for this government program, the applicant cannot have more than $2,000 to his or her name. If there is more than that due to an inheritance or an accident settlement, for example, the government allows the excess to go into a trust. With sound legal guidance, you can choose the kind of trust that would be best for your loved one.
The funds in a first-party trust belong to the special needs recipient. However, when he or she dies, any remaining funds go to the government as reimbursement for the person’s medical care.
Parents or other family members usually establish the third-party Special Needs Trust. This kind of trust is like a first-party option since the assets contained do not affect the beneficiary’s ability to receive SSI. However, the third-party trust is unique in that it can hold almost any kind of asset including stocks and even a home. However, it cannot receive assets that belong to the beneficiary. When the beneficiary dies, the remaining funds can either pass to family members or to a charity.
An alternative to a first-party Special Needs Trust, the pooled trust enables beneficiaries to pool resources to invest while they maintain their separate accounts. Like the first-party trust, any funds remaining in an account will reimburse the government for the deceased person’s medical care. However, a share also goes to the nonprofit organization that managed the pooled trust.