The Settlement Alliance

Benefits of Special Needs Trusts

Benefits of Special Needs Trusts

Nov 22, 2016

If you or your loved one is disabled and will be receiving a settlement, you may want to consider incorporating a special needs trust into your settlement plan. Special needs trusts offer a number of valuable benefits that can contribute to the disabled individual’s overall quality of life and financial security.

What is a Special Needs Trust?

A special needs trust (SNT) is an account that holds funds to be used for a disabled person. Depending on a number of factors including age, benefit status, and household income, the best fit could be a first party SNT, a pooled trust, or a third party SNT. A trustee—professional, or in some cases, a loved one—manages the account on behalf of the disabled individual. There are federal and state guidelines that determine which goods and services can be purchased with funds from the trust.

What are the Benefits of a Special Needs Trust?

  • Access to settlement funds: While the special needs trust does have restrictions on how the money can be spent, it allows the disabled individual to maintain access to their funds in order to meet their physical and financial needs.
  • Protection from misuse of funds: The federal and state guidelines for special needs trust distributions are intended to protect the disabled person’s funds. That means that if your disabled loved one receives a settlement, you don’t have to worry about “friends” or “advisors” popping up out of the woodwork and depleting the account.
  • Maintaining eligibility for government benefits: The funds in a special needs trust are not considered assets when determining eligibility for needs-based government benefits. If your disabled loved one relies on Medicaid, Supplemental Security Income (SSI), food stamps, subsidized housing, or other needs-based benefits, they may be able to retain eligibility if their settlement funds are placed in a special needs trust.
  • Protection from creditors: Again, there are very specific guidelines for what funds in a special needs trust can be used. While money kept in a typical bank account or certain other types of investments might be vulnerable to creditors, the money in the special needs trust can’t be touched for any purpose other than to purchase goods and services for the benefit of the disabled individual.

Whether you need assistance with drafting special needs trust documents or vetting trustees, our national network of experts is ready to help. For more information contact The Settlement Alliance at 800-464-2500 or info@settlement-alliance.com.

We are proud to partner with the highest rated structured settlement providers in the industry:

  • American general Life Companies
  • Berkshire Hathaway Structured Settlements
  • Liberty Life Assurance Company of Boston
  • MetLife
  • Mutual of Omaha
  • New York Life
  • Pacific Life
  • Prudential