One of the most important decisions you can make for a loved one with special needs is choosing how to plan for his or her future. What should you consider? How do you plan forward? While it may not be easy, when it comes to estate planning, one of your goals should be long-term stability and support.

For many families, this means protecting access to essential public assistance benefits while still providing broad financial support. When you work with an estate planning attorney, you will find that there are specific trusts designed to help you reach these goals. These trusts are called Special Needs Trusts. Special Needs Trusts are designed to meet these objectives, and others, and there are three main types to be aware of:

1. First Party. A first-party Special Needs Trust, or self-settled trust, is tailor-made for personal injury or medical malpractice settlements. They allow for disabled beneficiaries to own their settlement funds, as well as other assets placed in trust, in much the same way as an inheritance.

Low-income eligibility criteria typically bars people with even modest incomes from receiving important benefits like Medicaid and Supplemental Security Income. A first-party Special Needs Trust shields special needs beneficiaries, as long as the trust is used for expenses that supplement the basic services provided by these government programs. One downside, however, is that Medicaid benefits would need to be repaid from any remaining funds in a first-party trust after the beneficiary’s death.

2. Third Party. Third-party Special Needs Trusts are funded with assets that do not belong to a special needs beneficiary. Trust funds originating from parents, guardians, and family members, or other sources, including personal injury settlements, must be used for the benefit of the special needs individual.

There is no limit to how big a third-party trust can be. It also protects against losing access to valuable public assistance programs, provided that the funds of the trust are not spent on anything that would conflict with program rules. An added benefit is that third-party trusts do not require Medicaid to be reimbursed after the beneficiary’s passing.

3. Pooled Trust. A pooled trust can be considered an investment-based variation of the first-party Special Needs Trust. These trusts are usually established by independent organizations, often nonprofit institutions, that “pool” together many separate Special Needs Trusts into a larger single trust.

This large single trust is then invested in the market, which allows for larger returns at lower overall risk. Pooled trusts also attract high-level financial management services that individual Special Needs Trusts cannot afford. Each individual trust within the larger pooled trust is still owned by its specific beneficiary.

How are you planning for your loved one with special needs? Does this article raise more questions than it answers? Do not wait to ask us your questions and schedule an appointment with attorney Allen Poucher, Jr.