How Do I Create a Special Needs Trust?

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A special needs trust is a trust that you can set up if you have a loved one with special needs, such as a physical or mental disability, to help financially support them when you die and are no longer around. These trusts are used because if money is left directly to the disabled person, it may keep them from qualifying for certain government benefits. But if you are wondering, how do I create a special needs trust? The following information may be helpful.

To set up the trust, you must first create the trust document that will govern it. It is wise to consult a trust lawyer about this to help you tailor it to your specific situation. However, you do not need a lawyer to create a basic trust.

The person setting up the trust is referred to as the grantor or the settlor, and their role is to appoint another person, who is called the trustee, to manage the trust assets. In many cases the grantor of the trust will also name himself or herself as the trustee, with another person acting as the successor trustee. A trust is not legally effective unless the trust documents have been properly notified.

Each person acting as a trustee has a legal obligation to follow the terms set out in the trust document, and to ensure that the assets and property are used for the benefit of the person with the special needs, who is called the beneficiary. Any type of property can be held in the trust, such as real estate, cash, stocks, business holdings, patents, and even jewelry. Since the main purpose of the trust is to use cash to pay for the expenses of the special needs person, the trust will normally give the trustee the power to sell tangible items, such as cars, coin collections or jewelry, to raise necessary cash.

The trustee needs to have a good understanding of what the beneficiary’s personal needs are in order to effectively management the trust and determine whether to keep or sell tangible items. The trustee should also have a basic knowledge of investments and how they work, especially if the trust holds stocks, bonds or mutual funds. Anyone can contribute property or assets to the trust, except for the beneficiary. Although these trusts are normally created by parents for their disabled children, you don’t have to have a family relationship with the beneficiary to create or put money in the trust. There is also no limit to the number of trusts that may be set up for a particular beneficiary.

The trust is funded when the settlor makes an initial transfer of assets into the trust. This is normally only a small amount of money which is then added to when a parent or other relative leaves property to the trust, either through a will or revocable living trust to the trustee, or by naming the trustee as the beneficiary on designated forms that determine what happens to certain deposit brokerage accounts, retirement plans, or other assets such as stocks and bonds.

Trust assets can be used for anything the beneficiary needs, as long as it is not illegal and does not contravene the terms of the trust. The aim should be to enhance the quality of life of the beneficiary who suffers from a disability, by paying for things such as caregiving expenses, therapies and medication not paid for by insurance providers, and general bills, such as utilities and household expenses. The trust funds can also be used to provide for their enjoyment, such as travelling for vacation and buying electronics that the person wants to use.

The trustee must be vigilant and ensure that the funds from the trust are used appropriately and will not reduce any Government benefits or subsidies that the beneficiary may be receiving, such as housing or food benefits.

Please Note

The content provided herein is intended for informational purposes only. It should not be construed as legal advice. If the issues discussed in this blog are of concern to you or your loved ones, please seek the counsel of a qualified attorney.