How to use a special needs trust to protect your loved one

On Behalf of | Oct 5, 2020 | Estate Planning | 0 comments

Families who have loved ones with special needs must consider how to provide for them should the main income providers become disabled or pass away. Special needs individuals require specialized care and, in many cases, specialized equipment such as an adjustable bed or a wheelchair. None of these items are inexpensive, and ensuring their availability is one of the central purposes of a special needs trust.

Overview of a special needs trust

Special needs trusts (SNT) in Oregon come in two major types: a private special needs trust and a pooled special needs trust. Both kinds of trusts have the same two goals:

  • To provide for the medical and housing needs of the beneficiary during their lifetime
  • To protect the beneficiary’s income and assets from creditors

The two types of trusts are funded in different ways. A private SNT is established using personal assets from the beneficiary’s family or the beneficiary themselves. The pooled SNT is established by depositing the assets of the beneficiary’s family or other grantor into a pooled account that is managed by The Arc of Oregon, a non-profit organization that specializes in providing care for disabled individuals. Arc maintains a separate account for each member, but the assets of the pooled trust are invested to benefit all members of the pooled trust.

Advantages of the Arc pooled special needs trust

The Arc pooled SNT provides a number of advantages that may not be available to those who lack substantial assets, including:

  • Management fees are usually lower for SNT members.
  • The Arc has expertise that may not be readily available to private SNTs.
  • The Arc pooled SNT provides professional management that cannot always be accessed by private SNTs.
  • Because The Arc is a non-profit organization, investment decisions can be made impartially, without worrying about competing interests of family members.

Special needs trusts can provide tax advantages by sheltering trust income from both state and federal taxes. In order to achieve these benefits, the SNT must abide by the regulations set by the United States Internal Revenue Service (IRS) and the Oregon Department of Revenue.

Anyone who is interested in establishing a special needs trust, either privately or in conjunction with Arc, may wish to speak with an experienced estate planning attorney for advice on whether an SNT is appropriate.