A special needs living trust is used to distribute assets to beneficiaries who are mentally ill or disabled, or those who lack the mental capacity to arrange to manage their own financial affairs. The special needs living trust is set up in a way to maintain the beneficiary’s government issued disability benefits. With over 50 million Americans living with a disability, a special needs living trust is a common way to prepare assets to be transferred to disabled people while maintaining their benefits.

 

Beneficiaries

Many people with disabled beneficiaries can benefit from a special needs living trust for their loved ones. Most special needs living trust arrangements work with the person setting up the trust, called the grantor, setting up the assets to be managed by a trustee other than the beneficiary upon the grantor’s death. The beneficiary is the person with special needs who will receive the assets. The grantor is usually the trustee before he or she dies. After the grantor dies, a designated trustee successor takes over.

 

Assets

The assets of the trust can only be distributed as designated in the special needs living trust. The trustee must be fully aware of the laws involve SSI and disability benefits so that the assets of the trust can be issued without jeopardizing the benefits. This involves using the assets only for particular purposes such as caregiving costs, personal care, entertainment, trips, insurance, and other allowable services. There are wide range of items and services that can be paid for with a special needs living trust, however certain other things like food and rental costs may result in a reduction of disability benefits.

 

Successor Trustee

The successor trustee should be selected based on his or her knowledge of government benefits and overall financial knowledge. Many grantors will train a successor trustee on these issues. A special needs living trust can end when the beneficiary is not eligible for government benefits, when the beneficiary no longer needs the trust funds, when the funds of the trust are used up, or if the beneficiary dies. In many cases a special needs living trust can be drafted without the assistance of a legal expert, but in some cases advice may be needed.

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