What type of Maryland Special Needs Trust Should I Choose?

 Posted on September 26, 2024 in Estate Planning

Estate planning is when you make arrangements now for how your resources and assets can benefit people after your death. While most parents try to leave something behind for their children, parents of children with special needs often feel even more pressure to do so because of their child’s extra expenses and lower ability to earn a decent living. In Maryland, parents have various options for securing their child’s financial stability in the future. This article will examine different types of special needs trusts. If you are thinking about how to secure your child’s future, an experienced Rockville, MD estate planning attorney can help you understand which options best suit your needs. 

What is a Special Needs Trust?

Special needs trusts (SNTs) are special ways to provide people with disabilities or chronic illness with a source of income without rendering them ineligible for Medicaid, Social Security, Supplemental Security Income, and other government benefits. A designated grantor creates a trust and then distributes assets to a beneficiary. In Maryland, there are three types of SNTs:

• First-Party SNT: Otherwise known as a self-settled trust, this is funded with the person’s own assets and has a payback provision. When the beneficiary dies, any remaining funds are used to reimburse the state for Medicaid benefits, and whatever is left can be distributed to heirs or beneficiaries.

• Third-Party SNT: This is funded by someone else, usually a parent. There is no payback provision, so after the beneficiary dies, any remaining funds are distributed among relatives and other beneficiaries.

• Pooled SNT: This trust is composed of assets belonging to many people, pooled together to increase their investment power, and managed by a nonprofit organization. Each beneficiary has an account of their own. A pooled SNT can be funded with the person’s own assets (like a first-part SNT) or others’ (like a third-party SNT).

Benefits of a Special Needs Trust

When you create an SNT, the beneficiary can still receive significant government benefits. You can draft trust documents that will have clear instructions on how and when the assets can be used. The assets are also protected so creditors cannot claim them, so your child will have financial security regardless of any credit issues you may have.

Schedule a Free Consultation with a Silver Spring, MD Estate Planning Attorney

If you have a child with special needs and you want to ensure you are leaving something behind that will benefit rather than harm them, speak to a Potomac, MD estate planning lawyer to discuss whether an SNT is a wise choice for you. At The Eleff Law Group, we are dedicated to helping families reach the best solutions for them, and we will work hard to ensure you have peace of mind knowing that you have arranged for your child’s future even after you are gone. Call us at 301-857-1990 to schedule a free consultation.