Many people set up trusts so that they can divide their assets among their heirs. There are additional reasons for setting up trusts, however, such as caring for someone who cannot take care of themselves. In instances like these, setting up a trust can ensure that your loved one continues to receive care even after you are gone.
Special needs trusts are a way for minors, elder adults or mentally challenged adults to have provisions set aside for them. One such trust is self-settled. Keep reading for more information regarding these financial planning tools.
When are self-settled trusts appropriate?
According to the National Academy of Elder Law Attorneys a self-settled trust, also known as a self-funded trust, protects people with disabilities who receive government benefits from disqualification. There are generally income limits for people who apply for these benefits. People who want to pass on assets to their loved ones may unintentionally disqualify them from benefits by leaving a large sum of money to them. With a self-settled trust, however, the money sees management from someone else for the benefit of your loved one and does not affect their governmental benefits.
Who can set up a self-settled trust?
Only certain people can set up a self-settled trust. This includes parents, legal guardians, grandparents or the court who will be the trustee. This type of trust will hold funds from an inheritance or legal settlement. It is important to note that the funds must be for the benefit of your loved one and any misuse of funds by the trustee is strictly prohibited.