If you have a close relative who has special needs, you are likely to have some concerns about his or her ability to work as an adult. Luckily, several public programs provide financial support to individuals who have disabilities. This support is often almost unconscionably meager, though.
With a special needs trust, your loved one can access money to make his or her life better without jeopardizing his or her eligibility for public assistance. According to PALawHelp.org, in Pennsylvania, there are a few different types of special needs trusts from which you can choose.
If your loved one receives a large financial settlement from a lawsuit or a hefty inheritance, he or she may be ineligible for public benefits. That is, your loved one may have too many assets to qualify for government programs. A payback trust is a unique type of trust that holds these funds for your loved one’s benefit while ensuring he or she remains eligible for means-tested government assistance.
Common law trusts
A common law stems stems from a private contract between individuals. If you want to gift money to your relative, you can inadvertently render him or her ineligible for public assistance. By setting up a common law trust, though, you set money aside for your loved one’s benefit without actually giving it to him or her. This ensures your relative continues to receive needs-based help from government programs.
As its name suggests, a pooled trust pools the financial resources of more than one beneficiary into a trust that holds funds for the benefit of any beneficiary who needs financial support. This type of trust can be beneficial for a couple of reasons. First, it preserves eligibility for means-tested assistance by moving assets into a trust. Second, it gives beneficiaries access to greater financial support than they would have been able to generate on their own.
Which type of trust is right for your loved one probably depends on a careful analysis of both the law and your situation. Ultimately, to ensure you set up the most appropriate special needs trust, you should begin the estate planning process as early as possible.