Government benefits don’t completely support someone with special needs. Parents of children with disabilities face this reality daily. They also look to the future – how will their child receive the support he or she needs after they are gone? There are trusts to help with this type of problem. If you or a loved one has special needs, read on to learn more about how to set up a special needs trust.
Trusts, in a General Sense
A trust is a legal entity. It’s created to hold assets that are managed by a trustee for the benefit of trust beneficiaries. Generally, then, a trust consists of:
- The Grantor or settlor who creates the trust,
- The trustee who manages trust assets,
- At least one beneficiary, who benefits from the trust, and
- The assets used to fund the trust.
Another important component of a trust? Its purpose.
As evidenced by the name, a special needs trust provides support for someone with a disability or condition. In addition, special needs trusts are intended to provide this support without affecting the beneficiary’s eligibility for government benefits.
Special needs trusts exist in several forms.
Third-Party Special Needs Trust
This type of trust is also called a Supplemental Needs Trust or a Third Party Trust. The grantor of the trust is a third party – someone other than the disabled individual. That same third party also funds the trust. Since the beneficiary never truly owns the trust assets, the trust is fairly safe from creditors. When the beneficiary dies, any funds left in the trust are distributed according to the terms of the trust.
Another form of trust is set up in a completely different way.
First-Party Special Needs Trust
Instead of relying on a third party to establish a special needs trust, the individual with special needs may create “self-settled” special needs trusts.
This type of trust can be especially helpful if the disabled person inherits money, receives an insurance payout, or receives money due to a civil judgment. Instead of handing the money directly to the disabled individual, it may be used to fund a trust in most cases.
A Special Needs Trust May Not Be Your Only Option
Talk to the attorneys at the Dillon Law Group, PLC, to learn more about other options. We use our experience to help business clients with their questions and concerns. Give us a call at 757-962-4796 or use our convenient Contact Form to let us know you are ready to talk. We assist clients in Virginia Beach and Newport News as well as surrounding communities.