For parents in Colorado who want to provide for their children with special needs for the future, a special needs trust can play an important role in long-term support that supplements income from government programs. By creating this type of trust, the beneficiary can still receive government support while also accessing the benefits of the trusts. There are several different types of special needs trusts that families can choose to help provide for their children over the years.
In order to determine which type of trust is most appropriate, it is important to understand how trusts function. A donor supplies the funds that make up the principal of the trust, a trustee manages the funds according to the donor’s direction, and a beneficiary receives income from the trust. They are used in an array of estate planning solutions and can provide a greater amount of control to the donor in determining how assets are distributed, even after death.
A special needs trust is a structure that exists specifically to allow people with special needs to receive important government benefits like SSI and Medicaid that are means-tested while still receiving family support. A first-party special needs trust holds assets that belong to the beneficiary, like an accident settlement or an inheritance. A third-party trust holds assets that were donated by other people, such as the beneficiary’s parents. A pooled trust, on the other hand, holds funds for many different people with special needs.
While government programs are invaluable to support people with special needs, they often do not provide a sufficient income to cover all aspects of life. The special needs trust provides a means for families to provide for their loved ones without compromising these benefits. An estate planning attorney may be able to help a family to set up a special needs trust to manage funds in this situation.