A special needs trust holds money for a person with a disability without disqualifying them from public benefits such as SSI and Medicaid. Those programs allow only a very small amount of savings, so an inheritance, a lawsuit settlement, or a gift paid directly to the person can end their benefits. A properly prepared trust keeps that money available for a better quality of life while benefits continue.
The types of special needs trusts
The right kind of trust usually depends on one question: whose money is it?
Qualified (first-party) special needs trusts hold money that already belongs to the person with the disability, such as a personal injury settlement or an inheritance they received directly. These trusts are often the only way to protect those funds, and they come with their own special rules.
Pooled trusts are managed by a nonprofit organization and can be a good fit for smaller amounts or when no family member is available to serve as trustee.
Third-party special needs trusts hold money that parents, grandparents, or others set aside for a loved one with a disability. For parents of a child with special needs, this is often the single most important step in their estate plan.
A common and costly mistake
Many parents leave an inheritance directly to a child with a disability, or to a sibling “who will take care of her.” Either approach can put both the child’s benefits and the money itself at risk. A properly drafted trust avoids that.
How trust funds can improve a life
A special needs trust can pay for things public benefits don’t cover, such as therapies, education, transportation, technology, travel, recreation, and medical and dental care. A knowledgeable trustee makes a big difference in how well the trust serves the beneficiary.
Specific legal requirements, and why they matter
Special needs trusts have highly specific legal requirements, and the wrong choice of trust, or a single drafting error, can have serious consequences for benefits and for what is left for family later. Court approval may also be involved when a settlement or a minor is concerned.
Our attorneys are experienced at drafting special needs trusts to the correct legal specifications and tailoring each one to fit your family’s needs. We also advise trustees on managing the trust.
Special needs trust or ABLE account?
For smaller amounts and day-to-day independence, an ABLE account may help. For larger sums, inheritances, or settlements, a trust is usually needed. Many families use both.
Contact us today for a consultation
Jackson+Jackson helps families plan for loved ones with disabilities. Call us to schedule a consultation at any of our offices in New Orleans, Birmingham, Mobile, or Pensacola.
This article provides general information only. It is not legal advice, and reading it does not create an attorney-client relationship. Every situation is different; please consult an attorney about yours.