A special needs trust is a special type of trust that people can set up in order to help secure the financial integrity of a protected person. This differs from a conservatorship, which is a position that a person can take in order to manage the financial assets of a protected person, but a conservator can (and in some cases, should) look into setting up a special needs trust for a protected person in order to help them qualify for some federal and state assistance programs.
It’s important to ensure that the protected person qualifies for this type of trust. Speak with your attorney to see if this is the case for you, as there are certain conditions your state will have in order to qualify.
The Basics of a Special Needs Trust
A special needs trust is a court supervised trust that is used to protect the assets of a person, allowing them to spend down the value of their assets without having to quickly burn through all their cash/assets. This allows the person to still qualify for certain benefits and assistance provided by the government.
Many families choose to set up and implement a special needs trust if they feel that a person may need to soon go on medical assistance, but their current financial situation may disqualify from them from being able to partake in any government programs.
The Benefits of a Special Needs Trust
The primary benefits of setting up a special needs trust can be broken down into three main categories:
- Security: the assets within a special needs trust are generally secure
- Time: a special needs trust allows you to preserve money for someone so that it doesn’t have to spent down immediately. It can be gradually spent down over time.
- Financial shelter: money that is placed in a trust allows people to qualify for benefits they would have otherwise been denied for.
The Downside to Special Needs Trusts
There is one primary downside to setting up a special needs trust: the money that is placed within the trust has limitations as to what it can be spent on; it cannot be used to purchase whatever you want. Before setting up a trust, it’s best to contact an attorney and familiarize yourself with the laws surrounding this type of trust so that you know what you can and cannot spend the money on once the trust is formed.
Obtain Protection Through Surety Bonds
If you are considering setting up a special needs trust for yourself of someone you know, make sure you read up on surety bonds. Having a surety bond to go along with a special needs trust will ensure that the funds are not mismanaged, stolen or subject to fraud. To learn more about how a surety bond can provide necessary protection for your special needs trust, contact The Patrick J. Thomas Agency today.
Disclaimer: this is for informational purposes only and is not intended to be legal advice. If you need legal counsel, please contact an attorney directly.