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How to establish and use a special needs trust

Trusts are among the most frequently used estate planning techniques for residents of St. Louis and the rest of Missouri. These trusts, however, come in many different colors and sizes. What may be the perfect trust for a well-off family of four may be totally unfit for a family of five with adult children. The special needs trust is intended for families in which one member is disabled.

Special needs trusts are intended to provide a safe place for assets that will be needed to pay living expenses, certain medical expenses, and other costs of living for the disabled member.

All special needs trusts have the same purpose: to allow family members or friends of the disabled person to contribute assets that can be used to care for the disabled person as the parents or other caregivers age or die.

The different types of special needs trust

Missouri recognizes three types of special needs trusts (SNT): (a) first-party trusts that are established using the assets of the disabled person, (b) third-party trusts using assets of a third person, usually a close relative or friend, and (c) pooled special needs trusts in which assets of more than one disabled person are pooled to increase the trustee’s power to invest. In a pooled SNT, a separate account is maintained for each member, and the trustee is responsible for ensuring that changes in the amount of pooled assets are properly allocated to the members.

Some things are common to all SNTs. Every SNT must have a trustee, and many people choose a professional trustee, such as a bank or an attorney. Every beneficiary must be under 65 years old and suffer from a disability as defined in Social Security Administration regulations. The trust instrument must also specify that any assets left in the trust must be paid to the SSA as reimbursement for medical expenses received under Medicaid while the disabled person was alive.

Establishing an SNT

The advice of an experienced estate planning attorney is a virtual essential to ensure that the documents establishing the SNT contain the necessary provisions to ensure that the trust qualifies as an SNT.