Planning for the future is crucial, especially when it involves caring for a loved one with disabilities. In Indiana, setting up a special needs trust is a strategic way to manage this.
What is a special needs trust?
A special needs trust is a legal setup that secures assets for someone with disabilities without affecting their eligibility for public benefits like Medicaid or Supplemental Security Income (SSI). This trust covers essential expenses not usually included in public benefits, such as education, transportation, and personal care.
Considerations before creating the trust
Before establishing a special needs trust, it’s crucial to choose who will serve as the trustee, as this person will manage the trust’s assets with the beneficiary’s best interests in mind. Understanding the type of trust that best suits the situation is also important, including:
- First-party special needs trust: This trust is funded by the special needs person’s inheritance or court settlement. It holds assets that could otherwise disqualify the beneficiary from government programs.
- Third-party special needs trust: Parents or other family members fund this trust to offer supplementary support while preserving public assistance eligibility. Assets in this trust are not subject to burial limitations like those in first-party trusts.
- Pooled trust: Managed by nonprofits, these trusts pool resources from multiple beneficiaries. Each has a separate account, which helps save on investments and administration fees.
Beyond the basics
Setting up a special needs trust is a thoughtful step towards securing a stable financial path for loved ones with disabilities. It reflects careful planning and a commitment to their well-being. Through this trust, families can tailor support to fit unique situations, ensuring that the needs of their loved ones get met both now and in the future.
