A Special Needs Trust is a helpful tool that can considerably improve the quality of life for someone who receives public benefit program like Supplemental Security Income (SSI) or Medicaid.
A Special Needs Trust is a specific kind of trust that offers the option of allowing someone to remain eligible for public benefit programs while also receiving the benefit of a supplemental fund. This can pay for a range of goods and services that would not be covered through public programs.
Special Needs Trusts can be created with funds that belong to whoever is receiving public benefit programs or with funds that belong to one or mor family members. Different rules apply depending on the funds are used to create the Trust. However, the person receiving the public benefits will still receive the same benefit from the Trust due to them being the Trust beneficiary.
There are multiple types of Special Needs Trusts with different names, however, they all maintain eligibility for asset tested public benefit programs. The names that are used to describe these various types of Special Needs Trusts can be confusing, but there is no need for them to be. Be sure to keep in mind that there are only three different types of Special Needs Trusts that if explained properly, are not confusing.
Third Party Special Needs Trusts are funded by family members of the Trust beneficiary. They indicate that the assets funding the Trust originally belonged to someone else. Self-Settled Special Needs Trusts are funded by the Trust beneficiary and indicate that the assets funding the Trust priorly belonged to the Trust beneficiary.
Self-Settled Special Needs Trusts come in a couple of varieties, non-Pooled and Pooled. A non-Pooled Special Needs Trust is created for one Trust beneficiary, and the Trustee can be anyone that is qualified to act as a Trustee. This is typically what people refer to as a Special Needs trust. Most of the confusion regarding Special Needs Trusts come from people generically using the term without an actual understanding of the differences between Trusts. It is important to have a clear understanding of the term, so confusion is not perpetuated.
A Pooled Special Needs Trust is established for one Trust beneficiary as well, but the Trustee cannot be just anyone that is qualified to act as a Trustee. Inversely, Pooled Trusts must be created and administered by a non-profit association. To summarize the differences about the different types of Special Needs Trusts, below are the basic types:
- Third Party Special Needs Trusts are funded with the assets of someone who is not the Trust beneficiary;
- Non-Pooled Special Needs Trusts are funded with assets that belong to the Trust beneficiary
- Pooled Special Needs Trusts are funded with assets that belong to the Trust beneficiary.