Update Browser for the full First Western experience.

It looks like you may be using Internet Explorer. For the best experience on our site, we recommend using the most recent version of Google Chrome, FireFox, or Microsoft Edge.

How To Set Up A Special Needs Trust

For those with a child or relative with a disability, providing excellent care is a top of mind concern. As you consider how best to look after a loved one, you may want to know how to set up a special needs trust. Special needs trusts are* used to provide financial resources for a disabled person while preserving needs-based government aid from programs such as Medicaid and Supplemental Security Income (SSI). These government programs often disqualify a person who owns or has access to assets worth more than $2,000. If drafted correctly, these trusts can protect loved ones and give them a better quality of life than if they relied on government aid alone.

Who can set up a special needs trust?

Parents, guardians and other family members can set up or contribute to a special needs trust on behalf of a disabled or aged relative. Anyone may give to a special needs trust regardless of whether they are related to the beneficiary. Most commonly, however, these trusts are set up by the beneficiary’s parents or grandparents.

It is important to note these trusts are not always the appropriate solution for every family. Families above certain wealth thresholds likely do not need such a trust because the point of a special needs trust fund is to supplement government aid. Many ultra high net worth families choose to forgo public assistance because the beneficiaries of such trusts will have access to financial resources that will make the need for public assistance unnecessary.

It is important to note that state regulatory agencies have their own rules for who qualifies for public assistance, and the rules change frequently. Make sure you work with a knowledgeable attorney who can determine your eligibility before you attempt to establish a special needs trust fund.

What to include:

All special needs trust funds require certain basic information, but the distribution standards for a special needs trust are often the most important provisions in the entire trust agreement. A broad distribution standard may cause the trust to be considered an available resource and disqualify the beneficiary. On the other hand, a narrow standard will restrict the trustee from providing benefits which will enhance the beneficiary’s lifestyle.

Typical uses of special needs trusts include:

  • Therapies and extra caregiving unavailable through Medicaid
  • Vacations and other life experiences
  • Cell phone and internet services
  • Technologies, such as a computer
  • Pet care
  • A range of other expenses aimed at maintaining a certain quality of life

The fund may not normally be used for food, housing, or other basic needs provided by government programs. Because of the broad range of available uses, a letter of intent can express your loved one’s unique needs and serve as a useful guide to help your trustee properly allocate the funds.

Attorney, Trustee & Bank

Setting up a special needs trust can be a complicated process and requires specific language to assure compliance with constantly changing government regulations. For instance, this type of trust must state it is not a basic support trust and it is only to supplement the care given by the government. Federal and state agencies are quite specific about what must be included in any special needs trust form, so be sure to work with an attorney who is experienced with how to set up a special needs trust. Do not risk your loved one’s access to aid by trying to do this on your own.

Implementation of a special needs trust fund also requires the appointment of a qualified trustee. Often, a family member or trusted friend is appointed as a trustee because they are familiar with the specific needs of the beneficiary; however, because of the complex nature of this trust, it is very important to have an independent corporate trustee or co-trustee. With special needs trusts in particular, it is easy to disqualify a loved one from receiving government benefits, so it is imperative that your trustee is comfortable with the rules and regulations surrounding these trusts in order to avoid any missteps.

Finding the right financial institution to serve as trustee is important. These trusts require constant monitoring and supervision, a task which many banks won’t provide. Make sure to find a bank, such as First Western Trust, where the administrators will put the proper effort into taking care of the trust and your loved one.

Connect With Our Team