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What is a self settled special needs trust? A self-settled special needs trust is funded using the beneficiary’s own assets. For many years, a disabled person could only set up this type of trust if he or she had a living parent or grandparent, or, if not, by going through court proceedings for approval. In December 2016, the Special Needs Trust Fairness Act was signed into law. Now, those with special needs, but who still have capacity to make their own decisions, can independently create and fund their own trusts.
There are many estate planning tools that can be used to provide for a person with special needs. Often, someone else, such as a parent or sibling, will use their own assets to fund what is called a third-party special needs trust for the benefit of a disabled individual. However, sometimes a disabled person may have her own funds needing to be placed in a trust. This situation often arises when a person receives a law suit settlement or inheritance. In these cases, a self settled trust may be necessary to maintain eligibility for benefits such as Medicaid and Supplemental Security Income.
The right to create self-settled special needs trusts gives those with disabilities greater self-advocacy. However, this type of trust has a couple of drawbacks. First, the beneficiary must be under the age of 65 when the trust is established. Also, when the beneficiary dies, remaining assets must be used to pay back any Medicaid funds used for the care of that person. Properly written third-party trusts do not have such a requirement.
Many factors must be considered in providing for the current and future needs of a disabled person. Contact an experienced trusts and estates attorney for assistance in the area of special needs estate planning.