What Is A Special Needs Trust?
A Special Needs Trust is a trust established to meet the supplemental needs of a person with a legally defined disability who is under the age of 65. The trust is funded with funds or assets which already legally belong to the disabled individual.
These can include:
- Assets already in the individual’s name
- A cause of action on behalf of the beneficiary which will provide a settlement amount or jury award to the beneficiary from a personal injury or medical malpractice action
- Accounts on which the beneficiary is already named as a beneficiary payee or joint tenant
- The beneficiary’s interest in a property settlement in a divorce action
A Special Needs Trust is commonly called a “first-party trust” because the trust is funded with assets that belong to the beneficiary.
Who Can Establish a Special Needs Trust?
The Special Needs Trust may only be established by one of the following:
- The beneficiary’s parents
- A legal Guardian or conservator
- A judge, through a court order
Whoever is establishing the trust is called the Grantor.
What Can a Special Needs Trust Pay For?
Once a special needs trust is funded, it can be used to supplement the government assistance provided to the beneficiary. This assistance may cover things like advanced medical treatments, educational expenses, leisure activities, furniture, appliances, and more. The trustee manages the funds in the trust and makes disbursements on behalf of the beneficiary. It’s important to note that these disbursements can only be made for the benefit of the beneficiary and not for the beneficiary’s spouse or family members.
What Is a Payback Provision?
A Payback Provision is a requirement in a Special Needs Trust that ensures any funds designated for the beneficiary are considered theirs before being placed into the trust. This provision states that upon the beneficiary’s death, the trustee must first settle any claims by the state for medical assistance benefits provided to the beneficiary.