What you need to know about special needs trusts

On Behalf of | Aug 18, 2021 | Estate Planning

If your loved one in California has special needs, it’s not always easy to tell if they will outlive their money. A special needs trust can provide financial security and comfort for your loved one in the future. Read on for more information about these trusts.

What is a special needs trust?

A special needs trust is a legal arrangement that provides disabled persons with financial security without affecting their access to government benefits. Such an arrangement is typically set up by parents or other family members to help people with certain disabilities access funding for education, health care, housing, transportation and so forth.

What do you need to know about setting up a special needs trust?

You need to open a bank account for the trust. Secondly, you can name yourself or someone else to be in charge of managing the money you put into this account and deciding when that money will go to the beneficiary. If you’re the beneficiary, for instance, the trustee will be responsible for managing it on your behalf. On top of that, you’ll need to make a decision on how you want the money in the account managed.

Common types of special needs trusts

There are many types of special needs trusts to consider during estate planning. The most common ones include the following:

• Self-settled special needs trusts: A self-settled special needs trust is a type of trust that you create and fund yourself with your own money.
• Third-party special needs trusts: A third-party special needs trust is a type of irrevocable trust you set up for someone else outside your family.
• Pooled special needs trusts: A pooled special needs trust is a type of irrevocable trust that you set up for several beneficiaries.

The typical goal of a special needs trust is for the beneficiary to rest assured that they will be financially independent in future. Setting it up can go a long way toward helping your loved one and providing you with peace of mind.