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Elder Planning Isn't Just For The Elderly

Understanding the three types of special needs trusts

If you are caring for someone you love with special needs, you may consider how a trust can help at some point.

The purpose of a trust established for someone with special needs is to manage assets outside of the government benefits he or she receives. There are three types of special needs trusts to consider.

First-party trust

A first-party special needs trust serves the specific needs of the beneficiary. He or she might have received through an inheritance or an accident settlement that if placed in a checking account would jeopardize government benefits the special needs person depends on. The beneficiary can have no more than $2,000 in cash assets in order to qualify for Supplemental Security Income (SSI). Upon the death of the beneficiary, remaining trust funds must go to the government for medical care reimbursement.

Third-party trust

A third-party special needs trust is usually established by family members for the benefit of a special needs loved one. Assets of all kinds including stocks or other investments or even a house can go into this trust. The funds can go toward the needs of the beneficiary beyond the government benefits he or she receives. After the death of the beneficiary, the remaining funds pass either to members of the family or to a charity.

Pooled trust

Charities establish pooled trusts. Special needs beneficiaries pool their resources, which are then invested while the charity maintains separate beneficiary accounts. Upon the death of a beneficiary, the remaining funds go to the government for medical care reimbursement. However, the charity that managed the trust also receives a portion. An attorney can provide further information about this and other trusts that can benefit your special needs loved one.


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