People all over the country create special needs trusts to help a loved one with special needs. For families who have an individual with special needs, this is a crucial part of estate planning. Please read on to learn more about special needs trusts and how they may help you and your family achieve the peace of mind they need, knowing their loved one will be taken care of. Here are some of the questions you may have:
Why Would I Create a Special Needs Trust?
There are several reasons an individual would create a special needs trust. Primarily, people create special needs trusts for beneficiaries to gain access to supplemental resources without terminating their eligibility for certain government-issued programs, such as Supplemental Security Income and Medicaid.
Is There More than One Type of Special Needs Trust?
The three most commonly-used special needs trusts are as follows:
Pooled special needs trusts: Pooled special needs trusts combine various members’ assets into a larger investment fund. These trusts have certain requirements, however. To create a pooled special need trust, you must prove a disability and that the need for the trust is to be developed through a nonprofit organization.
First-party special needs trusts: These trusts can only be created by a parent, legal guardian, or grandparent, and require the beneficiary to be under the age of 65. These trusts are irrevocable, and can only be funded with the beneficiary’s funds. When you create a first-party special needs trust, public agencies retain reimbursement upon death. Generally, these funds are established when beneficiaries are set to receive or inherit funds through a lawsuit or settlement.
Third-party special needs trusts: These are created for a beneficiary by another person, either during their lifetime or upon their death. Generally, these trusts are funded through life insurance, and family or close friends can contribute to them via gifts.
How Does a Special Needs Trust Work?
People create special needs trusts for various reasons, as special needs trusts have several different benefits. For example, a special needs trust may help your loved one retain certain government benefits he or she needs, including Medicaid, HUD housing assistance, in-home support services, and Supplemental Security Income. Additionally, a special needs trust may also benefit your family by providing supplemental funds, protecting certain government benefits, helping you avoid the probate process, and by covering the cost of funeral arrangements.
Contact Our Experienced New Jersey Firm
Juan C. Velasco, Esq. is a trusted attorney who concentrates on bankruptcy, family law, real estate, and estate matters who has been serving the New Jersey area for over 25 years. If you need experienced legal counsel, please contact Velasco Law Office and we will be happy to assist you.