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Special needs trust can help take care of vulnerable loved ones

Many Washington families want to put together a family trust to help take care of their children and grandchildren after they are gone, while also avoiding the expensive and cumbersome probate process. However, for some families this is a more pressing issue than it is for others. Parents or grandparents of people with special needs may be especially concerned with providing for their loved one after they are gone.

There is a kind of trust which is specifically designed for this purpose. Known as the special needs trust, this kind of estate planning instrument allows people to provide for the care of a special-needs person in a way that doesn't interfere with government benefits such as Supplemental Security Income or Medicaid.

There are different ways to go about setting up a special needs trust. The most common type is a testamentary or third-party trust. This type doesn't go into effect until after the person setting up the trust has died, and funding typically comes out of that person's estate.

Another type is known as a first-party special needs trust. This type is funded with the assets of the person with special needs. For example, if a person has been permanently disabled due to an accident and received a settlement related to that accident, the settlement goes into the first-party trust. There, it can help pay the person's bills even if the person is unable to do so by him- or herself.

But special needs trusts are not just for the wealthy or those who have received settlements. There is another type of special needs trust known as a pooled trust. In these arrangements, many people pool their money into one trust and a nonprofit organization manages it to make sure that the beneficiaries are cared for appropriately.

Setting up any kind of trust takes a lot of work, and it takes a lot of research to make sure one has chosen the right person or institution to serve as trustee. When setting up a special needs trust, the family must estimate how much the loved one's care will cost in the future. There are a lot of factors to consider and it's important for Washington families to get professional help when they begin estate planning

Source: The Fiscal Times, "Estate Planning Guide for a Special Needs Child," Sonya Stinson, July 10, 2013

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