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The advantages of a special needs trust

Estate planning isn’t just a tool for the super-wealthy to pass along their assets to future generations. It’s also crucial in providing for the future of children with special needs. Creating a special needs trust (SNT) is a good option for many families here in Arkansas.

SNTs allow families to pay for medical costs, travel, entertainment and other expenses for special needs children without jeopardizing their eligibility for government programs, such as Medicaid or Security Supplemental Income (SSI).

What options are available?

As with other trusts, SNTs shield funds from credit card companies, landlords and different types of lenders. The trust is overseen by one or more trustees, which can include family members, trusted professionals and nonprofit organizations. Examples of SNTs include:

  • First-party trust: Also called self-settled trusts, used when a disabled person owns property before the onset of the disability, receives an inheritance or has a court-mandated settlement. Upon the beneficiary’s death, the remaining funds must be used to reimburse a state for Medicaid benefits received during their lifetime.
  • Third-party trust: This is the most commonly-used SNT, usually set up by the parents of the disabled person. In contrast to the first-party trust, funds that remain after a beneficiary’s death can be passed along to other family members or organizations depending upon the family’s wishes.
  • ABLE account: Created by the Achieving a Better Life Experience Act of 2014, ABLE accounts are affordable options which are similar to college 529 Plans and managed by the state. They are funded with pre-tax dollars and have tax advantages for beneficiaries who are also the account owners.
  • Pooled asset trusts: Nonprofit organizations manage these funds, which are distributed to beneficiaries based on the funds their caregivers contribute to the pool. Those with fewer resources often use this option.

SNTs provide peace of mind for care of special needs children

Laws surrounding special needs trusts can be extremely complicated as recipients often receive other benefits through state or federal programs. An experienced estate planning attorney here in Arkansas can help you determine which type of trust fits your family's needs to ensure the best possible quality of life for your loved one.

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