FAQs: Trusts

If you’re not well-versed in the world of trusts, they may seem like an abstract concept. However, they are a very important part of financial planning, so it’s a good idea to gain a basic understanding of trusts and what they’re good for.

Read on to learn the answers to frequently asked questions about the different kinds of trusts.

FAQs

What is a pooled special needs trust?

The Legacy Enhancement pooled special needs trust was created to manage funds for supplemental needs and assist in enriching the quality of life of our clients. Designed for individuals who have a disability or special needs and who have received money from a divorce, legal settlement, or inheritance, the pooled special needs trust can provide you and your loved ones with lasting security and ongoing support.

Unlike other types of trusts, pooled special needs trusts are managed by non-profit organizations, rather than a single trustee. With pooled trusts, every beneficiary has a separate established account.

These accounts are pooled together for the purpose of trust management and investment. In self-settled trusts, otherwise known as (d)(4)(C) pooled trusts, the individuals with the disability/special needs, parent, guardian, grandparent, or a court establishes each subaccount. In such cases, the assets of the disabled or special needs person fund the trust.

What are the advantages of utilizing a pooled special needs trust?

Some of the advantages of using a pooled special needs trust are as follows:

Whoever manages the trust and its assets will have knowledge about agency rules with respect to income and resources.
- This person will also have the ability to handle any questions from the Supplemental Security Income (SSI) or Medicaid programs.
The directors of the trust are typically relatives of disabled people and are in tune with that community.
Even if you’re not rich, a pooled trust provides your loved one with the benefits of a special needs trust.

What is a first-party special needs trust?

A first-party special needs trust is funded using assets belonging to the trust beneficiary or funds that the beneficiary was legally entitled to (i.e. assets from an award or settlement, etc.). This kind of trust has to include federal and state provisions requiring announcement and payback to the state when the trust beneficiary dies or early elimination of the trust. This type of trust is subject to recovery by the Department of Health Care Services (DHCS), in which they’re required to recover an amount reaching the total medical assistance paid on behalf of the trust beneficiary.

What is a third-party special needs trust?

A third-party special needs trust is funded using assets that belong to someone other than the trust beneficiary. Additionally, this person must never have had possession or legal interest of the assets in the trust. This type of trust doesn’t need to be filed with the Special Needs Trust Depository unless there’s a provision for payback to the DHS in the trust.

What are minor trusts?

A minor trust is a trust set up for a minor. This type of trust allows you to leave your property and other assets for your child or young relative while ensuring that the trust is properly handled by a designated trustee until the child is of legal age.

What are the benefits of a structured settlement?

The advantages of a structured settlement are as follows:

Payments from a structured settlement do not count for income tax purposes.
Income from a structured settlement will not affect eligibility for government benefits.
Structured settlements offer significant flexibility in terms of payment amounts and duration.
If the recipient of a structured settlement dies, a designated heir can receive any remaining payments, tax-free.