Pros and Cons of a Special Needs Trust

When it comes to protecting the financial future of a special needs child or other loved one, there are a number of different avenues you can explore to accomplish this task. From an AZ special needs trust to a traditional will in which you stipulate who would care for your special needs loved one should something happen to you, there is no such thing as over-planning when it comes to caring for a person with special needs.

A special needs trust in particular is always a good idea because it provides a financial provision for someone with special needs. In many cases, special needs individuals receive federal government benefits and there are strict rules on how much income they can utilize without interfering with those benefits. For this reason, many parents and caregivers set up a special needs trust, into which they can funnel monies from various sources, without worrying about how that added income and those gifts will affect those benefits.

An AZ special needs trust can be used to pay for any number of expenses, including: medical expenses, car payments and other transportation costs, insurance premium payments, in-home health care, rehab costs, food, rent or mortgage payments, vacation expenses, entertainment, recreational materials and more. However, like any financial account, there are pros and cons to using AZ special needs trusts. Understanding what those pros and cons are can help you to determine whether or not this type of account will work for your situation:

Pros:

Helps to maintain eligibility for federal aid: In addition to disability payments, the beneficiary of an AZ special needs trust account will also remain eligible for Medicaid, which is important because it can be hard to find new insurance with a pre-existing medical issue.
Funds funneled into the account are tax-deductible: This means that for those funneling money into the account, they can enjoy this benefit as a result.
Funds go directly towards the care of the disabled person: The protocol for maintaining an AZ special needs trust is strict and the monies can only be spent on the person in question. This is without a doubt one of the more significant advantages of setting up this type of account.

Cons

Fees add up: Sometimes, the fees to set up and maintain an AZ special needs trust account can be extensive. Over time, these fees can add up, costing quite a bit to maintain the account.
Inability to be independent: This particularly applies to older disabled individuals that want greater control over their finances. This account doesn’t provide a lot of leeway for that and this can be frustrating to older individuals with special needs. Because of the strict rules associated with this account, there is little in the way of freedom in terms of what can be done with the money outside of what it can be spent on.
Paying back Medicaid: This is another distinct disadvantage of an AZ special needs trust. Because the federal government allows these monies to add up to any amount and be used for a number of different reasons, sometimes, the individual has to pay back Medicaid an amount equal to whatever Medicaid paid for the special needs person’s medical expenses. Depending on the medical issue in question, this can put quite a dent on the person’s AZ special needs trust savings, in some cases depleting it altogether. This is a definite drawback of a special needs trust and is something to consider when signing up for this type of account on behalf of a disabled loved one.

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