Special needs trust
Encyclopedia
A special needs trust is created to ensure that beneficiaries who are disabled or mentally ill can enjoy the use of property
which is intended to be held for their benefit. In addition to personal planning reasons for such a trust
(the person may lack the mental capacity to handle their financial affairs) there may be fiscal
advantages to the use of a trust. Such trusts may also avoid beneficiaries losing access to essential government benefits
.
A trust for a disabled beneficiary
may be set up in any of the common law
countries or other countries which recognise the concept of the trust. They have particular advantages in legislation in relation to both taxation and state benefits in, for example, Ireland
and the United Kingdom
, and in relation to the provision of healthcare, long-term care
and nursing home
benefits under the state-sponsored Medicaid
welfare system in the United States of America.
Special needs trusts can provide benefits to, and protect the assets of, the physically disabled
or the mentally disabled. Special Needs Trusts are frequently used to receive an inheritance
or personal injury
settlement proceeds on behalf of a disabled person or are founded from the proceeds of compensation for criminal injuries, litigation or insurance
settlements.
A common feature of trusts in all common law jurisdictions is that they may be run either by family members (a private trust) or by trustee
s appointed by the court. Especially where a trust is to be established for a disabled child or young person, great care is generally taken in the choice of appropriate trustees to manage the trust assets and to deal with future replacement appointments. The use of a private discretionary trust can not only be more efficient in terms of taxation and access to government benefits but can also allow for more efficient investment of funds held than where funds are held by a court official (such as the Official Receiver
in England and Wales). However where no appropriate trustees can be found, e.g. on the death of existing trustees, the court will intervene.
Special Needs Trusts are often set up under the guidance of a Structured settlement
planner in cooperation with a qualified legal and financial team to ensure the trust is set up correctly. Only authorized non-profit organizations are approved to manage a Special Needs Trust Program. Pooled trusts are available nationwide including The Arc of Northern Virginia, Commonwealth Community Trust in Richmond, Virginia and the Special Needs Trust Center in Florida.
Special Needs Trusts are also known as Supplemental Needs Trust
s in the USA and a more detailed article on the US specific characteristics of such trusts, including their interaction with the Medicaid system, is found at that page.
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...
which is intended to be held for their benefit. In addition to personal planning reasons for such a trust
Income trust
An income trust is an investment that may hold equities, debt instruments, royalty interests or real properties. The trust can receive interest, royalty or lease payments from an operating entity carrying on a business, as well as dividends and a return of capital.The main attraction of income...
(the person may lack the mental capacity to handle their financial affairs) there may be fiscal
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
advantages to the use of a trust. Such trusts may also avoid beneficiaries losing access to essential government benefits
Welfare
Welfare refers to a broad discourse which may hold certain implications regarding the provision of a minimal level of wellbeing and social support for all citizens without the stigma of charity. This is termed "social solidarity"...
.
A trust for a disabled beneficiary
Beneficiary (trust)
In trust law, a beneficiary or cestui que use, a.k.a. cestui que trust, is the person or persons who are entitled to the benefit of any trust arrangement. A beneficiary will normally be a natural person, but it is perfectly possible to have a company as the beneficiary of a trust, and this often...
may be set up in any of the common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
countries or other countries which recognise the concept of the trust. They have particular advantages in legislation in relation to both taxation and state benefits in, for example, Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
and the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, and in relation to the provision of healthcare, long-term care
Long-term care
Long-term care is a variety of services which help meet both the medical and non-medical need of people with a chronic illness or disability who cannot care for themselves for long periods of time....
and nursing home
Nursing home
A nursing home, convalescent home, skilled nursing unit , care home, rest home, or old people's home provides a type of care of residents: it is a place of residence for people who require constant nursing care and have significant deficiencies with activities of daily living...
benefits under the state-sponsored Medicaid
Medicaid
Medicaid is the United States health program for certain people and families with low incomes and resources. It is a means-tested program that is jointly funded by the state and federal governments, and is managed by the states. People served by Medicaid are U.S. citizens or legal permanent...
welfare system in the United States of America.
Special needs trusts can provide benefits to, and protect the assets of, the physically disabled
Physical disability
A physical disability is any impairment which limits the physical function of one or more limbs or fine or gross motor ability. Other physical disabilities include impairments which limit other facets of daily living, such as respiratory disorders and epilepsy....
or the mentally disabled. Special Needs Trusts are frequently used to receive an inheritance
Inheritance
Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. It has long played an important role in human societies...
or personal injury
Personal injury
Personal injury is a legal term for an injury to the body, mind or emotions, as opposed to an injury to property. The term is most commonly used to refer to a type of tort lawsuit alleging that the plaintiff's injury has been caused by the negligence of another, but also arises in defamation...
settlement proceeds on behalf of a disabled person or are founded from the proceeds of compensation for criminal injuries, litigation or insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
settlements.
A common feature of trusts in all common law jurisdictions is that they may be run either by family members (a private trust) or by trustee
Trustee
Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...
s appointed by the court. Especially where a trust is to be established for a disabled child or young person, great care is generally taken in the choice of appropriate trustees to manage the trust assets and to deal with future replacement appointments. The use of a private discretionary trust can not only be more efficient in terms of taxation and access to government benefits but can also allow for more efficient investment of funds held than where funds are held by a court official (such as the Official Receiver
Official Receiver
An officer of the Insolvency Service of the United Kingdom, the Official Receiver is an officer of the court to which he is attached. The OR is therefore answerable to the courts for carrying out the courts' orders and for fulfilling his duties under law...
in England and Wales). However where no appropriate trustees can be found, e.g. on the death of existing trustees, the court will intervene.
Special Needs Trusts are often set up under the guidance of a Structured settlement
Structured settlement
A structured settlement is a financial or insurance arrangement, defined by Internal Revenue Code as periodic payments; a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in Canada after a...
planner in cooperation with a qualified legal and financial team to ensure the trust is set up correctly. Only authorized non-profit organizations are approved to manage a Special Needs Trust Program. Pooled trusts are available nationwide including The Arc of Northern Virginia, Commonwealth Community Trust in Richmond, Virginia and the Special Needs Trust Center in Florida.
Special Needs Trusts are also known as Supplemental Needs Trust
Supplemental Needs Trust
A Supplemental Needs Trust is a U.S.-specific term for a type of special needs trust . Supplemental needs trusts are compliant with provisions of U.S...
s in the USA and a more detailed article on the US specific characteristics of such trusts, including their interaction with the Medicaid system, is found at that page.