Special Needs Trusts: How to Fund the Trust

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SPECIAL NEEDS TRUSTS
How to Fund the Trust
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How Is A Special Needs Trust Funded?
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A Special Needs Trust can be funded either
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• A Special Needs Trust
• can be funded either

by a parent, relative or other third-party
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A Special Needs Trust can be funded either
by a parent, relative or other third-party
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with the beneficiarys own assets, which is known
as a self-settled Special Needs Trust
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• In the case of a
• self-settled Special Needs Trust,
• federal law requires that the trust reimburse
  Medicaid when the beneficiary dies

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The reimbursement would come from whatever
property remains in the trust
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• Federal law has a few additional requirements for
  a
• self-settled Special Needs Trust

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First, the beneficiary must be disabled as
defined by the Social Security Act, that is,
unable to engage in any substantial gainful
activity as a result of his or her disability
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The beneficiary must also be under age 65 when
the Special Needs Trust is established and funded
with the beneficiarys assets.
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The trust must be funded with the beneficiarys
assets
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Pooled Trusts
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• If the person is over age 65, however, only a
  pooled Special Needs Trust is available for a
  self-settled trust

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A POOLED SPECIAL NEEDS TRUST is created through
a non-profit organization, where the funds of
several beneficiaries are pooled together
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Those joint funds are then managed and invested
on behalf of the beneficiaries by the non-profit
organization
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Any money left in the trust when the beneficiary
dies is used to help others with disabilities
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Third-Party Special Needs Trust
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A third-party Special Needs Trust (funded with
assets from others) is not subject to the
Medicaid payback requirement
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• All property remaining when the beneficiary dies
  may be distributed
• in the manner directed by the terms
• of the trust

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Another advantage of a third-party Special Needs
Trust is that there is no age limitation or
specific disability required
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Administering the Trust
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• After the trust is funded, the trustee becomes
  responsible for using the funds from the trust to
  support the beneficiary, while protecting
  eligibility for necessary government benefits

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The trustee is also expected to pay taxes, keep
all necessary records of transactions, and keep
up with the beneficiarys needs
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Types of Property Used to Fund Trust
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• Although practically any type of property can be
  held in the trust
• (i.e., real estate, stocks, jewelry)
• cash is what is needed to pay for items that
  arent provided by SSI or Medicaid

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Therefore, a Special Needs Trusts will generally
authorize the trustee to sell tangible items in
order to raise cash
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• Also, since the purpose of a
• Special Needs Trust is to improve
• the beneficiarys quality of life,
• the types of products and services
• that can be paid for out of the
• trust funds are very broad

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In fact, nearly anything that is neither illegal
nor contrary to the terms of the trust are
allowed
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Terminating a Special Needs Trust
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• As with most trusts,
• the Special Needs Trust is terminated
• when its purpose has been served
• and it is no longer needed

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If the funds run out, the beneficiary is no
longer eligible for or no longer needs
government benefits or if the beneficiary dies,
the Special Needs Trust will be terminated
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If you would like to discuss Special Needs Trusts
with a licensed estate planning attorney in
Fayetteville Arkansas, contact our firm to
schedule a free consultation
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Click to visit arkansas-estateplanning.com