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What is a Special Needs Trust?

If a person with special needs has assets – perhaps from a lawsuit award or settlement or from a gift or inheritance – those assets can disqualify the person from receiving essential public benefits like Medicaid and Supplemental Security Income (SSI). A special needs trust can allow the person with special needs – the trust’s beneficiary – to remain eligible for needs-based public benefits while at the same time preserving the assets to enhance the beneficiary’s quality of life.

Why a Special Needs Trust? Special needs trusts are intended to supplement, not replace, the kind of basic support that programs like Medicaid and SSI provide. Such trusts pay for anything the trust document provides for, including comforts and luxuries that meager public assistance funds don't cover – hence the term “special needs.” A special needs trust has been likened to a “parent's pocket” – that is, it pays for the kinds of things that a parent would just reach into his or her pocket to cover. These trusts typically pay for amenities beyond the simple necessities of life, things like education, recreation, counseling, and medical attention.

Special Needs Trusts Spending Rules Are Specific Funds held in a properly drafted special needs trust should not affect a Medicaid or SSI recipient’s benefits. But problems can develop when funds from a special needs trust are spent. Because the rules are very complicated, it is best to always sit down with your special needs planner to discuss what you intend to do with your trust before making any payments to anyone.

Main Types of Special Needs Trusts There are two main types of special needs trusts: first-party and third-party trusts.

First-party (or “self-settled”) trusts are used when the trust assets belong to the person with special needs, perhaps from an award or settlement.

Third-party trusts are generally used when a parent or guardian wishes to establish and fund a trust for the benefit of the person with special needs, usually a minor child.

A third kind of trust, a “pooled trust, ”contains the funds of many people with special needs and may be appropriate for some people.

A qualified special needs planner can walk you through the pros and cons of each type of trust and help you to properly establish one.

Moors & Cabot, Inc - Johnson Cotroneo Group

999 Vanderbilt Beach Rd. Suite 102

Naples FL, 34108

239-449-7982, 239-449-7992

Investment Advisory Services provided by Johnson Cotroneo Group are through Moors and Cabot, Inc., an SEC-registered investment advisor.

Brokerage services and investment products offered through affiliated broker-dealer Moors and Cabot, Inc., Member FINRA, SIPC

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