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What are special needs trusts?

Phone: 412-281-5060

What are special needs trusts?

What are special needs trusts?

By Heidi Rai Stewart

“Special needs trusts” protect government benefits for disabled persons. There are three types of special needs trusts: (i) payback trusts; (ii) pooled trusts; and (iii) common law trusts, also called third-party trusts. Disabled persons use payback trusts or pooled trusts to protect government benefits. Other persons, such as parents or grandparents, can create any of the three trusts to protect the benefits.

During the disabled person’s life, each trust can provide resources to supplement the benefits received. Upon the disabled person’s death, a payback trust requires the Trustee to reimburse the state funds it expended for the disabled individual, distributing any remaining principal as the trust creator designated. Pooled trusts require certain nonprofit associations to serve as Trustee. Any funds remaining in a pooled trust after the disabled person’s death are distributed to charitable funds benefitting disabled persons.

Common law trusts are created by third parties for the disabled person and are funded with third parties’ money. Common law trusts can be funded during the Donor’s lifetime or upon the Donor’s death under provisions in the Donor’s Will or Revocable Trust. Consulting an experienced special needs attorney ensures the best choice of trust for the disabled person and the Donor.