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What is a special needs trust?

A special needs trust is one set up to benefit an individual who is receiving government benefits. The special needs trust is a perfectly legal strategy that Social Security laws permit as long as the beneficiary of the trust is not given control over the frequency of disbursements or amount of disbursements made from the trust, and does not have the ability to revoke the trust.

In most cases, if a California resident is receiving Social Security disability benefits, he or she could be at risk of losing some or all of those benefits after receiving a sizable inheritance. However, by creating special needs trust that benefits the individual, the person can benefit from the luxuries provided by the trust and continue getting his or her Social Security payments at the same time.

Special needs paid for by a special needs trust might include dental and medical costs, education, equipment, rehabilitation, treatment, eye care and glasses, maintenance, transportation costs including the price of a car, insurance costs, dietary needs, computer and electronic equipment, spending money, vacations, movies, athletic contests, money to buy gifts, travel, paying for a companion and the cost of things that help with self-esteem. As you can see, this list is particularly extensive.

The beauty of a special needs trust is that parents who are caring for a disabled child can create this kind of trust to ensure that their child continues to live the highest quality of life, closest to or on par with what he or she enjoyed while the parents were alive. Furthermore, if a special needs individual receives a large inheritance, he or she can set up a special needs trust as well for that money, as long as he or she is not named as the trustee and this role is assigned to someone else.

Source: FindLaw, "Types of Trusts," accessed June 09, 2016

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