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When should you consider a special needs trust?

On Behalf of | Jun 10, 2022 | Estate Planning |

Creating a special needs trust in California is a good way to protect a loved one with a physical or mental disability. Here are some facts to know if you’re considering doing that.

What is a special needs trust?

A special needs trust is an estate planning option that allows you to protect a disabled loved one by providing financial support. However, unlike leaving assets from your estate or money from a retirement plan or mutual fund, that support does not compromise the person’s ability to continue receiving governmental benefits.

What are the different types of special needs trusts?

The most common type of special needs trust is the third party, which is created by someone other than the beneficiary. Third party special needs trusts can be revocable or irrevocable. They are normally created by a parent or grandparent who funds them.

Third party special needs trusts can be standalone or testamentary. Standalone means that the beneficiary immediately accesses the funds. Testamentary means that they don’t receive the funds until after the death of the trust creator.

A pooled trust goes to the benefit of multiple people who need assistance from a special needs trust. Nonprofit organizations create and manage these trusts.

How can funds from a special needs trust be spent?

When a special needs trust is created to benefit someone with a disability, a trustee is chosen to oversee things and allocate the funds. Funds cannot directly go to the beneficiary because that could affect their ability to continue receiving benefits like Medicaid or SSI.

Instead, funds from a special needs trust directly pay for things the beneficiary needs such as a home health aide, medical expenses, education and more.

A special needs trust can give you peace of mind that your disabled child will be taken care of when you’re no longer around.