Key Considerations When Establishing A Special Needs Financial Trust

Law Blog

The establishment of a special needs financial trust is often seen as a crucial step towards securing the future of a loved one with special needs. However, it is not a task that should be undertaken lightly. Several key considerations should be taken into account during the process.

The first consideration is the selection of a trustee. The trustee's role is one of great responsibility, as they will be tasked with managing the trust and making financial decisions on behalf of the beneficiary. It is recommended that someone who is trustworthy and reliable and who has a good understanding of the beneficiary's needs is chosen for this role.

The choice of a successor trustee should also be given serious thought. Should the initial trustee become unable to fulfill their duties, the successor trustee will take over. It is important that this individual is also trustworthy and reliable.

Funding the trust is another critical aspect. There are various sources from which the trust can be funded, including personal savings, life insurance proceeds, or inheritances. An understanding of the implications of each funding source is essential. For example, using the beneficiary's own assets to fund the trust could potentially affect their eligibility for certain government benefits.

The trust terms should be carefully considered. These will outline how the trust funds are to be used. It is generally advised that the terms are kept somewhat flexible to accommodate changes in the beneficiary's needs over time. However, care must be taken to ensure that the terms do not allow for the usage of funds in a way that could disqualify the beneficiary from receiving government benefits.

The timing of the trust's establishment is another key consideration. While it might seem prudent to set up the trust as early as possible, this may not always be the best course of action. Certain factors, such as the beneficiary's age, health, and current financial situation, may influence the optimal timing.

The potential tax implications of establishing a special needs financial trust should not be overlooked. The type of trust chosen can impact the taxes that are owed. Expert advice is recommended so you can choose the most tax-efficient option.

Lastly, it is important that the trust documents are reviewed regularly. Changes in laws or in the beneficiary's circumstances may necessitate adjustments to the trust.

Reach out to an attorney for more information about establishing a special needs trust


18 September 2023

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