If you are considering setting up a special needs trust, you might be wondering: what are the rules? There are several important aspects to consider when making this kind of trust. Most importantly, these trusts are not funded until the beneficiary dies. In other words, if your child has many trusts and other assets, it will be very expensive and frustrating for everyone involved. That’s why you may want to consider setting up a separate SNT for your child.
A third-party special needs trust is what most parents would set up. This type of trust is not created by the beneficiary, but by a parent, grandparent, or family member. If possible, it is best not to put the beneficiary’s assets into this trust. This can be problematic if the assets go into the beneficiaries’ own name. Additionally, the trustee cannot be the beneficiary. The purpose of a special needs trust is to ensure the beneficiary receives the government benefits they deserve.
Generally, you can set up a first-party SNT if you have more than $2,000. However, it is important to understand that federal and state law don’t always mesh. In Pennsylvania, for example, the Uniform Trust Code says that “the courts don’t have the authority to establish a trust.” The term “settlor” refers to the person who creates the SNT and contributes property to it. Courts don’t generally consider themselves to be a person when creating a Special Needs Trust.
Special needs trusts are useful for individuals with disabilities who lack mental capacity to handle their own financial affairs. They can provide financial help for expenses that are common for people with disabilities, such as education or medical care. These funds are protected from creditors, and are available to the disabled individual at all times. But they may not be used for the beneficiary’s personal use. Rather, they must be used to reimburse Medicaid for services.
There are some limitations that apply to special needs trusts, as well. Among them is that the trust cannot replace government benefits or pay for government-managed medical care. However, these limitations are largely inconsequential. The special needs trust is not a tax shelter – it does not count as income. It should be set up by a qualified attorney. You should also be careful to follow the rules of the special needs trust.
In general, a Special Needs Trust should contain instructions for trustees. You should understand the trust’s terms and understand how the distributions affect your beneficiary’s government benefits. You should never spend the money that will decrease your beneficiary’s government benefits, but you should also make sure that the trust contains rules about how to spend the funds. While some distributions may reduce your beneficiary’s government benefits, others may be in your child’s best interests.
In addition to these rules, your child’s beneficiary should be aware of all of the government benefits that are provided by a special needs trust. They can use these funds for expenses that otherwise wouldn’t be covered by government benefits. For example, you can use these funds for personal care and attendants, vacations, home furnishings, and education. A special needs trust will also be able to pay for rehabilitation.
Lastly, you can include supplemental needs in the trust. Special needs trust funds are typically used for supplemental needs, which are expenses that improve the quality of life of a disabled beneficiary. Some of these expenses may include out-of-pocket medical expenses, education, transportation, and home furnishings. These expenses are not counted in total assets, which means that they can be spent for many other purposes.
There are other important rules for special needs trusts. The main rule is that you should choose a trustee that has the best interests of the child. A professional or family member serving as co-trustee may be helpful, but it’s important to remember that a co-trustee should have the child’s best interests in mind and be knowledgeable about the child’s condition and future needs.