Protecting Your Disabled Beneficiary’s Financial Needs With a Special Needs Trust Colorado

What Is a Special Needs Trust?

Do you have a loved one or family member with special needs? They’re entitled to government aid benefits, but other assets created for their benefit could interfere and waive their eligibility. A special needs trust fund is designed to improve their quality of life without affecting their eligibility for government benefits.

In other words, a special needs trust is designed to provide supplemental care to a disabled individual or those things that are not covered under public benefits. That’s why it’s also called a supplemental needs trust.

Federal and state law allows a Colorado special needs trust to be set up by family members to preserve the eligibility of a disabled person for government benefits. At the same time, the disabled individual will still be able to receive financial help from their family.

Understandably, a family member would want to provide additional support to a loved one. Under Colorado law, special needs trusts are established to maintain resource eligibility for medical assistance. They can be set up by the individual, parent, grandparent, legal guardian, or the court.

To receive government benefits like Supplemental Security Income SSI and Medicaid, an individual’s assets and income must remain below a certain level. For example, providing assets to someone receiving SSI benefits could jeopardize their eligibility. However, funds transferred into special needs trusts don’t count for public benefit purposes.

Types of Special Needs Trusts

There are different Colorado special needs trusts, depending on who established the trust and other characteristics.

For instance, self-funded trusts can be established by any disabled individual younger than 65. Their guardian, parent, grandparent, or even the beneficiary themselves can establish this trust. Trusts are established with a disabled person’s assets, such as a personal injury settlement or an inheritance. It is also known as a disability trust.

If someone other than the beneficiary funds the trust that doesn’t include their assets, then that is called a third-party trust. For example, parents can establish a trust for their disabled child. It can be established while the parents are alive or upon their death by including it in their will.

A pooled trust is set up through a non-profit association. This type of trust uses the assets of different people. The assets are pooled together and put into a large investment fund. However, every user owns a separate account. It is typically created when there isn’t enough money to justify creating a private special needs trust.

Duncan Legal provides legal representation and counsel on special needs trust laws in Centennial, Colorado. Your estate planning attorney will help you set up and maintain your special needs trust to protect the future of your loved one.

How Do These Trusts Work?

Bear in mind that only the trustee can handle trust money. So, it’s essential to pick a reliable person to be the trustee.

Other rules have to be followed. While public benefits can be used to pay for food and medical care, money from the special needs trust can be used for a telephone bill or a vacation. The trustee’s job is to pay from the trust directly to the provider. Also, trust payments shouldn’t be made to beneficiaries directly, even though special needs trusts are funded to help beneficiaries financially.

However, in some cases, the trustee may give the beneficiary regular monthly cash payments. But, be careful not to exceed the public benefits income limits. Under most benefit programs, you can’t have more than $2,000 in countable or non-exempt assets.

Your Options in Inheritance and Settlement Compensations

A special needs trust can protect the assets of physically or mentally disabled individuals. Duncan Legal often deals with special needs trusts to protect assets collected by:

• Inheritance proceeds
• Divorce or bankruptcy
• Review the inventory, make sure the right amounts are being paid

Without placing these assets into the appropriate trust, you run the risk of waiving your eligibility for government benefits. Contact an experienced estate planning attorney at Duncan Legal or send an email for legal advice on setting up a special needs trust in Centennial, Colorado.