Amy McCormick, Washington Trust Administration Manager & Senior Trust Officer, D.A. Davidson Trust Company
A special needs trust (SNT) is a type of trust that enables a person living with a disability or other special needs to receive financial support while maintaining eligibility for government benefits like Supplemental Security Income (SSI) or Medicaid.
Special needs trusts can be composed of an individual’s own resources, often resulting from a personal injury lawsuit or settlement. They can also be funded by third-party resources, such as estate planning by parents or grandparents for their disabled children or grandchildren.
Here are five reasons a special needs trust may be right for your situation.
1. Preserve eligibility for government benefits.
People with special needs may rely on means-tested government benefits for health care and other costs. A properly drafted special needs trust can maintain eligibility for these benefits so that trust funds can be used on supplemental needs that can enhance the beneficiary’s quality of life.
2. Create a plan for inheritance.
A stand-alone SNT can be named in estate planning documents of parents and grandparents without the fear of jeopardizing their loved one’s eligibility for benefits. An existing trust could also receive annual gifting.
3. Fund the special needs trust with different types of assets.
SNTs can be funded with cash, investments, real estate or other resources. A second-to-die life insurance policy may be a good option for funding an SNT so that other family resources are not used up first.
4. Enhance the quality of life of a beneficiary.
An SNT can supplement government benefits and enhance the quality of life of a beneficiary. For example, some beneficiaries may need a house remodeled for accessibility or a modified van for transportation. SNTs can also pay for medical expenses not covered by Medicaid or other public benefits, in addition to many other educational and extracurricular activities.
5. Keep assets available for long-term needs.
By providing a structure for a beneficiary’s funds, a trust can help keep those funds available for long-term needs of the beneficiary. Budgets and discretionary distributions can be adjusted based on needs and market ups and downs for invested assets. Further, the trust structure can be a helpful tool for beneficiaries who have a difficult time managing money and paying bills.
Talk with your D.A. Davidson Trust Officer today, or find one here, to see if creating a special needs trust is the right option for you or your loved one.
This material is being provided for educational and informational purposes only. D.A. Davidson & Co. is a registered broker-dealer and registered investment adviser that does not provide tax or legal advice. Information contained herein has been obtained by sources we consider reliable, but is not guaranteed and we are not soliciting any action based upon it. Any opinions expressed are based on our interpretation of the data available to us at the time of the original article. These opinions are subject to change at any time without notice. Copyright D.A. Davidson & Co., 2023. All rights reserved. Member FINRA and SIPC.