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Establishing a trust for the special person in your life

Everyone should have an estate plan, but if you have a loved one with special needs, setting up a good plan with the appropriate trust is even more important.

A trust is a major focus in your estate plan, a popular tool that usually outlives the donor. A special needs trust can ensure that your beneficiary has access to needed funds in addition to any government assistance that he or she receives. You can meet your goals to provide financial care for the life of the beneficiary with a special needs trust. It involves three parties:

  • The donor, who provides the trust funds
  • The trustee, who administers the funds
  • The beneficiary, who benefits from the trust

Government benefits are important to a special needs individual, and all three types of special needs trusts can help you prevent assets from jeopardizing any financial aid available through the Supplemental Security Income program. To be eligible for SSI, the applicant can have no more than $2,000 in his or her name. Special needs trusts may be first-party, third-party or pooled trusts.

In the case of a first-party trust, the beneficiary is also the donor. If your loved one has more assets than the limit—money received from an accident settlement, for example—he or she can still qualify by setting up a special needs trust to hold his or her own assets. 

You or another donor other than the beneficiary may set up a third-party special needs trust. You may wish to establish this type of trust using your own assets or a life insurance policy to create a steady income for your loved one with a disability.

A pooled trust is one that a charity establishes. Your loved one pools his or her funds with the other beneficiaries for the purpose of investing and receiving greater returns; each beneficiary retains a separate account for personal needs.

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