Whether you’re a parent planning for your child’s future or a caregiver looking out for someone’s well-being, understanding special needs trusts as a powerful estate planning tool can make a significant difference in a person’s life.

What is a Special Needs Trust?

The purpose of a trust is to set aside assets with the intention of providing for a loved one or a favorite organization’s future use. A special needs trust is a specific form of trust established to provide for a beneficiary who has special needs and may need the assistance of a trust in managing the funds. The special needs trust ensures that the beneficiary will continue to be eligible for public benefits they may receive throughout their life.

How does a Special Needs Trust work?

A trustee manages the money in the trust for the beneficiary's sole benefit. The trustee will manage all aspects of the trust with the intent that the funds and/or properties included will support the beneficiary for life. Whether these funds last for life depends on several factors, including:

• The total amount of assets used to fund the trust
• Changes in the economy
• Future needs of the beneficiary
• The trustee’s knowledge and experience

If the beneficiary receives government benefits, these may be negatively impacted if the trustee simply provides funds directly to the beneficiary. Therefore, most trustees will make distributions directly to the vendor of goods and services needed. Doing so may maintain the beneficiary’s eligibility for public benefits.

How is a Special Needs Trust set up?

Creating special needs trusts has become very specialized, and with the Affordable Care Act and restrictions on Medicaid, trusts are best drafted by a qualified attorney. Each trust must be accepted by the National Review Team in Atlanta; if rejected, the trust must be modified within 90 days. If it is not accepted, the beneficiary will lose public benefits until the trust is properly modified to meet the guidelines.

We can’t cover all the information you need to know about special needs trusts in this article. You need a qualified trust attorney to work closely with your personal trust advisor to properly build a trust and ensure your loved one is protected. But we can help you get started. Want to learn even more about Special Needs Trusts? Get more in-depth information with our Special Needs Trust eBook. 

Get in touch with a Cadence trust administration professional to find out if this powerful estate planning tool is right for you.

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.