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What are the benefits of a special needs trust?

A special needs trust is a good option for many disabled people who have accumulated some wealth to keep government benefits, such as Supplemental Security Income (SSI) or Medicaid.

People who receive those benefits are usually held to strict eligibility standards and can lose them if they typically have more than $2,000 in their bank accounts. A special needs trust can have enormous benefits for those who have received a personal injury settlement or an inheritance.

Paying for "non-countable" expenses

A special needs trust can be used to supplement a disabled person’s government benefits by paying for so-called “non-countable” services, equipment or expenses, such as:

  • House and furnishings
  • Personal belongings
  • Car
  • Educational pursuits
  • Life insurance policies

Main types of trusts

Funds do not go directly to the disabled person receiving government benefits, but rather money is distributed directly for non-countable expenses. The two common types of special needs trusts are:

First-person: Funded by the assets of the disabled person, such as money from a settlement or inheritance. If money is left over when the person dies, it is usually used to reimburse SSI or Medicaid for benefits the person collected while they were alive.

Third-person: Created by the person’s family for their current and future care. Parents who set up a third-person trust have more control over the funds than in a first-person trust and the remaining balance can be distributed at their discretion if their loved-one dies.

Seek legal advice for creating a special needs trust

The decision to create a special needs trust is usually to preserve government benefits or the inheritance of a disabled family member. An experienced estate planning attorney here in Illinois can help you decide whether it’s the best way to care for their current and future needs. Your attorney will help you choose the right option as well as consult on other important decisions, such as finding the right person to manage the trust and taking care of the ongoing costs of administration.

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