When a person creates an estate plan, there are many options to consider. This is not only to prepare for their future but the future of their loved ones. Often times, people have others who are dependent on them that face certain challenges and need extra assistance. Questions can arise regarding who will take care of this individual, how they will receive public benefits, and if they can be provided with the financial help to sustain a proper standard of living. It is because of this that a special needs trust can be created to set up future help for a loved one who cannot fully take care of themselves.
Pennsylvania Special Needs Trusts
A special needs trust is established when a trustor allows a trustee to oversee property and assets that are placed within a trust to benefit a third party beneficiary. This allows a disabled individual to receive the assistance they need. This beneficiary must be under the age of 65 when the trust is created. In addition to this, property or assets cannot be added to the trust after their 65th birthday. The trust beneficiary cannot owe more than $2000 in assets to avoid losing their right to Supplemental Security Income (SSI). The following assets can be placed in a special needs trust to preserve access to the proper assistance:
- Inherited property or assets
- Money received from a life insurance policy
- Assets from a divorce settlement
- Compensation from a settlement or lawsuit
Types of Special Needs Trusts
In the state of Pennsylvania, there are three main types of special needs trusts that can be created for a loved one:
- Self Funded Special Needs Trusts: This trust is permitted to allow the beneficiary’s own monies to be used. It must be created by a parent, grandparent, legal guardian, or court in order to receive and hold assets that belong to the disabled individual who receives the trust. This should direct the trustee to use trust funds to supplement the public benefits of the beneficiary.
- Third-Party Special Needs Trusts: This trust can be created by someone else for a beneficiary. They can be made during an individual’s lifetime or in the event of a death, as they are usually funded by life insurance. Other relatives such as grandparents, siblings, aunts, uncles, and friends can make gifts to this trust.
- Pooled Special Needs Trusts: This trust takes assets from several people and puts them together in a “pool” to create a larger investment fund for the disabled beneficiary. It requires the establishment of a disability and the need for the trust to be developed through a nonprofit organization.
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