When it comes to trusts, there are many options, two of which are special needs trusts and supplemental needs trusts. Despite their similar sounding names, they are different, but over time the supplemental needs trust has become less common and the two terms are commonly mixed.
If you are looking to set up a trust in addition to having a will or as a form of estate planning, contact your attorney to see if you qualify for either a supplemental needs trust or a special needs trust.
These are the difference between the two and the commonalities that they share.
What is a Special Needs Trust?
A special needs trust is a court supervised trust. It is generally used to protect the assets of a person while allowing them to qualify for certain benefits given by the government. They can essentially act as a shelter for money that can then be gradually spent down without having to spend it all at once.
These types of trusts can be complicated, so it’s best to work with an attorney when setting one up. Also keep in mind that you may need to obtain a surety bond, which can help provide compensation should the money that is placed within the trust be mismanaged or should some type of fraudulent activity take place.
Those who qualify for special needs trusts generally need to have limited assets. In many cases, but not all, people looking to qualify are those seeking medical assistance.
What is a Supplemental Needs Trust?
A supplemental needs trust, while similar to a special needs trust, is a trust that is commonly set up using a third party’s funds. It’s essentially a trust you set up for someone else using their funds. This could be a parent, grandparent, etc. Supplemental needs trusts are more vague, so work with your attorney to see if you qualify and how you can set one up.
Keep in mind that those who qualify for special needs trusts and supplemental needs trusts are limited in how they can spend the money within the trust. There are strings attached that prohibit funds in the trust from being used on items that are paid for by a government assistance program (e.g. a person can’t buy food from a grocery store using trust money if that person qualifies for food stamps).
Obtain Bonds for Trusts
Whether you are using a special needs trust or a supplemental needs trust, you may need to obtain a surety bond. Contact The Patrick J. Thomas Agency today for more information on bonds regarding trusts.
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.