You want to take care of your loved ones with special needs; however, if there is a mishandling of trust funds, it may cause more harm than good. Not only may the funds face taxation, but if it appears that an individual with special needs receives or has too much money, it could disqualify him or her from receiving benefits from the government.
Thankfully, there are ways around this. If you or a loved one has special needs, having a trust in place can help to protect the funds intended for care. In fact, there are a few trust options to choose from.
A third-party trust is a trust set up by a family member to support a loved one with special needs. A trustee manages this trust, and the individual it is for does not have direct access to it. There are various ways to utilize this fund, including:
- Classes or hobbies
- Professional fees
- Personal services
The trustee may distribute monies for such expenses and activities, but he or she cannot give them as cash gifts.
As the name indicates, a first-party trust is a trust set up for property that the individual with special needs owns directly. This may include property acquired in various ways, such as:
- Life insurance
- Personal injury claims
There are several different first-person trusts to choose from. It is important to understand the stipulations of the trust and whether it meets federal and state rules for government support.
A pooled trust is a trust fund composed of investments from various sources. The individual with special needs or his or her loved ones may set up this fund, and all such parties may contribute to the pool after its establishment.
Understanding the different types of trusts is very important in making the right choice for you or your loved one. Even if you have a trust in place, should you face a trust dispute it may be helpful to be familiar with how the trust functions. Take some time to do your research and determine the best route for you and your particular situation.