Victor Notaro

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How to Create a Special Needs Trust


How to Create a Special
Needs Trust

AAO [oa N eRe] Y]

If one of your loved ones has a disability, you should consider creating a special needs trust for them. Through a trust, parents, family, and others can contribute funds to ensure a secure future for their family member with special needs.

A Trust and Government Benefits

A special needs trust can be used to supplement government benefits. Funding in a special needs trust helps meet an individual’s needs that are not covered by Medicaid and Security Supplemental Income (SSI), such as vision, dental, and recreation costs. Federal and state governments only supply the funds necessary to meet essential needs, and may support them only at or even below the poverty line.  Remember that any money given to trust beneficiary may be considered income, and may cause a reduction in the benefits that they are eligible for.

Where to Start

Before you consult with any experts, gather information about the individual and their disability. Think about what level of care is essential or desirable. Learn about their current health and the level at which they can care for themselves. Will the amount of care necessary change in the future?  

Also compile information about family financial assets. This includes insurance plans, policies, and investment and retirement accounts. Then decide how you want your trust to be funded. Would you prefer that it be funded through a life insurance policy, or consistent contributions that meet the annual gift exclusion tax?

Professional Help

Setting up a special needs fund is a difficult project that often requires professional help including financial planners and attorneys. The rules regarding funds are often very complicated and strict. Start with an attorney who specializes in trusts and estates. The Special Needs Alliance is a valuable resource that lists many appropriate attorneys.

A financial planner should be another member of your team. Use an expert to make sure that you best leverage both the disabled person’s pre-existing government benefits and their new trust. A financial planner can also help you determine how much money to put into the trust.

Even after you’ve created your trust fund, stay in touch with your professional help. If there are any changes, such as an update to Social Security rules, they’ll be able to help you adjust your trust fund accordingly.

How Much to Contribute

Determining how much money to contribute to your fund requires you to take many factors into consideration. These include the individual’s disability and the level of care that they require. A financial planner will be able to help you with this decision. Many experts recommend that you begin with $100,000 because of costs associated with the trust’s creation and management. Funding for your trust can come from family assets, inheritances, or life insurance policies.

Creating a special needs trust will provide a secure future for an individual with a disability. The process is complicated, and requires professional help and hours of organizing information. However, it is an important step in determining the future of your loved one.


This article was originally published on VictorNotaro.com




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