Special Needs Trust: A Unique Solution to Address

Special situations deserve special trust solutions

A Special Needs Trust can help you put the financial pieces of your loved one's future together. With a Special Needs Trust, you can provide for the lifetime needs of a disabled family member without jeopardizing his or her eligibility for government benefits.

Special Needs Trust: A Unique Solution to Address Unique Needs

When you put together a puzzle, you may try out many pieces before you find the ones that fit. Similarly, if you are caring for a child, spouse or other family member with a disability, you may have considered many traditional financial solutions before finding the options that fit the unique needs of your situation.

Planning for the financial future of your loved a one with physical, emotional or mental disabilities presents special challenges. Who will provide financial support when you are gone, and who will help manage his or her finances? How can you furnish future support without jeopardizing your family member's eligibility for government or private benefits?

A special needs or supplemental needs trust is a specialized estate-planning tool that can address these issues. This type of type of trust is structured to maximize the amount of funds available for your loved one's care while protecting his or her eligibility for government and other aid programs. Additionally, you can appoint a professional trustee to administer the trust and ensure that the trust terms are competently executed long after you pass away.

Instead of paying for basics, which are covered by benefit programs, the special needs trust you create pays for the extras your family member may need such as traveling companions, special equipment or recreation.

Why not give the money to other family members?

While it might seem more personal to bequeath an amount of money to a sibling or another close relative to care for a family member with disabilities, this may not work in practice. Even with the best of intentions, no one can predict the future or know how circumstances might change. Consider these potential issues:

• The money could be seized in judgments, bankruptcy or divorce settlements involving the relative.
• The relative can't be legally forced to use the money for the benefit of the person with disabilities.
• When the relative dies, the money may go to his or her heirs.

Funding special needs trusts

Generally, a parent, grandparent, legal guardian or court can set up a special needs trust. The person with disabilities cannot be the "creator" of the trust even if the trust is funded with his or her personal assets.

You may establish a special needs trust as part of your Will (known as a testamentary trust) or while you are alive (known as a living or inter vivos trust). With a testamentary trust, your Will transfers the portion of your estate you designate to the special needs trust upon your death. You can also designate the trust as the beneficiary of various assets, such as employee benefits and life insurance policies.

There are varied ways to fund a Special Needs Trust including life insurance, cash (includes gifts from relatives and friends), investments, retirements plan benefits, personal property and real estate, and proceeds from personal injury settlements. To ensure the trust is adequately funded, you'll need to estimate how much income your family member is likely to need over the course of his or her lifetime.

Other considerations

Selecting a trustee - A trustee is the person or institution you select to administer your trust and manage its assets. Because of the highly complex and specialized nature of this type of trust, a professional corporate trustee is usually most appropriate. You may want to name a family member and a professional trustee as co-trustees.

Working with qualified professional - Special needs planning is complex and technical, and the laws differ from state to state. To properly plan for your  relative's future, work with a qualified attorney, tax advisor and financial professional who have experience with special needs planning and understand the income, gift and estate tax consequences of funding and administering a special needs trust.

We want to talk with you

For more information on this topic or on the services provided by Ameriprise Personal Trust Services, a division of Ameriprise Bank, FSB, please contact your Ameriprise financial advisor.