A Washington resident who has a loved one with a disability may decide to plan for their future by using a special needs trust. This type of trust is designed to provide for future costs of long-term care, and it can supplement Medicaid and Social Security benefits. However, there are special rules regarding this type of trust regarding income and the distribution of proceeds.
A special needs trust can be funded from many different types of sources, including personal injury lawsuit proceeds, life insurance proceeds and life savings. Many experts recommend at least $100,000 in funds based on the costs of setting up and maintaining this type of trust.
Special needs trusts can also be tailored based on the specific requirements of the beneficiary. A first-party special needs trust is set up by an individual prior to the onset of a disability or after receiving assets and qualifying for Social Security benefits. Third-party trusts, which are more common, are set up by other individuals for the benefit of a person with a disability.
There are special rules regarding special needs trusts and the income of the person with disabilities. Government rules limit the trust beneficiary's financial resources to $2,000. Families who want to set up a special needs trust should consider consulting with an attorney experienced in estate planning. Legal counsel can make sure that all the rules and regulations regarding a special needs trust are followed.
An estate planning attorney may also be able to refer families to financial planners with experience handling assets for individuals with special needs. After a special needs trust is established, the family should make sure that all gifts and inheritances go to the trust rather than the individual. They should also stay in touch with their attorney in case the trust needs updating.