The Settlement Alliance

Questions to Answer Before Choosing a Special Needs Trust

Questions to Answer Before Choosing a Special Needs Trust

Aug 12, 2016

An individual who receives money from a personal injury settlement has a number of important considerations when it comes to how the funds will be distributed. Those receiving needs-based government benefits (e.g. Medicaid, SSI, food stamps, etc.) risk losing eligibility if the settlement causes the individual’s income to rise above income and/or asset thresholds. For a disabled individual relying on monthly income and/or healthcare benefits from the government, the loss of eligibility could be devastating.

A special needs trust (SNT) can preserve eligibility for many needs-based programs while allowing the disabled individual to access their settlement proceeds within the trust when needed. There are a few different types of SNTs, including a first party special needs trust, a third party special needs trust, and a pooled trust. There are a number of questions that should be answered prior to determining whether a special needs trust is the best investment vehicle for the disabled individual—and if so, which type of SNT best fits their needs.

Making the Right Decision

A settlement planner or an elder law attorney can help guide the disabled individual through the SNT process. Questions that should be answered include:

  • Does the disabled individual currently receive any needs-based government benefits (e.g. SSI, Medicaid, food stamps, Section 8/HUD housing, etc.)?
  • What age will the disabled individual be when establishing the trust?
  • What are the disabled individual’s current assets?
  • What is the current household income?
  • What are the expected monthly needs of the disabled individual?
  • Do the anticipated assets to be placed into the trust belong to the disabled individual or a parent/guardian?
  • Will the disabled individual utilize a structured settlement annuity to fund tax-free income directly into the special needs trust?

While a special needs trust may not be the best option for every situation, many disabled individuals and their families have found that an SNT is a useful tool for preserving the settlement while maintaining eligibility for essential needs-based benefits.

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

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