4 Steps To Set Up A Disabled Person’s Trust

When it comes to caring for loved ones with disabilities, financial planning is key One way to ensure that your family member with special needs is taken care of in the long term is by setting up a disabled person’s trust This type of trust is specifically designed to provide for the needs of disabled individuals while protecting their eligibility for government benefits Here are 4 steps to help you set up a disabled person’s trust:

1 Determine the Type of Trust:
The first step in setting up a disabled person’s trust is to determine the type of trust that will best suit your loved one’s needs There are two main types of disabled person’s trusts: first-party trusts and third-party trusts

– First-party trusts are funded with the disabled individual’s own assets, such as an inheritance or a personal injury settlement These trusts are subject to Medicaid payback requirements, meaning that any remaining funds in the trust must be used to reimburse Medicaid for the recipient’s care upon their death.

– Third-party trusts, on the other hand, are funded with assets belonging to someone other than the disabled individual, such as a parent or grandparent These trusts do not have Medicaid payback requirements and are often used to supplement the disabled person’s government benefits.

2 Choose a Trustee:
The next step in setting up a disabled person’s trust is to choose a trustee who will manage the trust on behalf of the disabled individual The trustee is responsible for making decisions regarding the trust’s investments, distributions, and expenditures, so it is important to select someone who is trustworthy and responsible

Many families choose to appoint a family member as trustee, while others opt to hire a professional trustee, such as a bank or trust company setting up a disabled persons trust. Regardless of who you choose as trustee, it is crucial that they have a thorough understanding of the rules and regulations governing disabled person’s trusts.

3 Draft the Trust Agreement:
Once you have determined the type of trust and selected a trustee, the next step is to draft the trust agreement This legal document will outline the terms and conditions of the trust, including how the trust will be funded, how the trust assets will be managed, and how distributions will be made to the disabled individual.

When drafting the trust agreement, it is important to be specific about the disabled person’s needs and preferences For example, if the individual requires specialized medical care or therapies, the trust agreement should include provisions for covering these expenses Additionally, the trust agreement should address how the trust will be terminated and what will happen to any remaining funds upon the disabled individual’s death.

4 Fund the Trust:
The final step in setting up a disabled person’s trust is to fund the trust with assets The amount of funding will depend on the disabled individual’s needs and the type of trust you have chosen If you are setting up a first-party trust, the disabled individual’s assets will be transferred to the trust If you are setting up a third-party trust, you will need to transfer assets from your own estate to the trust.

It is important to consult with an attorney or financial advisor when funding the trust to ensure that you are complying with all legal requirements and maximizing the trust’s benefits for the disabled individual Additionally, you may want to consider purchasing a life insurance policy to provide additional funding for the trust in the event of your death.

In conclusion, setting up a disabled person’s trust is a proactive way to ensure that your loved one with special needs is provided for in the long term By following these 4 steps and working with knowledgeable professionals, you can create a trust that will protect your family member’s financial future while preserving their eligibility for government benefits.