A Nevada Trust for Beneficiaries with Physical, Mental, or Behavioral Disabilities
Key Features of Special Needs Trusts
- When properly structured, does not limit beneficiaries access to government assistance
- Trustee maintains absolute discretion over assets
- Aids in maintaining quality of life for a beneficiary
A special needs trust, also known as a supplemental needs trust assists with the needs of those with physical, mental, or behavioral disabilities. A trustee establishes and administers a special needs trust to maintain absolute discretion over the trust and determines how to execute the trust in the best interest of the beneficiary.
Individuals are unable to receive government assistance for a disability if they are the owner of a trust. A special needs trust, when properly structured, allows an individual to benefit from property housed within the trust while still receiving essential government benefits.
Special needs trusts often collect assets from a variety of sources and benefit a disabled beneficiary. Usually, a special needs trust is established to house funds from a legal settlement or to receive life insurance from an estate plan.
There are three types of special needs trusts to be aware of:
Third-Party or Family Trust
Third-Party special needs trusts are most often established by loved ones establishing a trust for a family member with special needs. Typically parents or grandparents establish a third-party special needs trust, however, anyone can establish one other than the beneficiary.
A stand-alone special needs trust is often preferable because special needs trusts established under a Will or sub-trust within a Living Trust does cannot receive gifts or even come into existence until the death of the grantor.
First-Party Special Needs Trust
Until 2016 special needs trusts could only be established by a third-party such as a parent or grandparent. After The Special Needs Trust Fairness Act became law, disabled persons who are mentally or legally competent gained the right to establish their own trusts.
Most often, an individual establishes a first-party special needs trust if they own assets in their name prior to being disabled.
Court-ordered special needs trusts are only used in specific circumstances, often when a disabled person has inherited money or granted money in a settlement.
Transfers from a court settlement can’t be put into a normal special needs trust so they are put into a court-ordered trust, also called a “Type A” special needs trust.
Laws may vary by state when it comes to setting up a court-ordered special needs trust.
The Importance of Choosing the Right Trustee
The trustee of a special needs trust needs to act in the best interest of the beneficiary for the lifetime of the trust. The trustee also needs to keep records and prepare reports for government programs and meet the needs of the beneficiary which are not covered by government assistance.
The trustee spends money to improve the beneficiaries quality of life and upholds the trust in court when necessary. The trustee is also responsible for managing and distributing trust assets after the death of the beneficiary or termination of the trust.
A trustee can be chosen from among trusted family members or an independent corporate trustee may be appointed. It’s important to discuss the benefits of both options with an experienced lawyer or trust company.
Moving Forward with an SNT
A special needs trust could be an option for your family if a beneficiary is unable to manage the trust themselves or they require government assistance.
Special needs trusts are highly regulated, so it’s vitally important to consult an experienced lawyer and trust company to ensure the trust is structured correctly. If not appropriately structured, a beneficiary could lose access to government assistance or be expected to pay the government back for services received.
For more information on the advantages of Special Needs Trusts, please contact Alliance Trust Company.