The Mechanics of How to Set Up a Special Needs Trust

If you are in the settlement phase of a case and your client is receiving needs-based government benefits like Medicaid, SSI, or some combination of those, a special needs trust can be used to protect those benefits.

How to Set Up a Special Needs Trust

When a legal settlement is obtained, the funds can come into your Interest on Lawyer Trust Account (IOLTA), and you can establish the special needs trust from there. It’s best to call in a settlement planner before closing a settlement case when setting up a special needs trust. 

If it is determined that a client needs a special needs trust, we will send you an intake form where we gather basic information about the client and his or her benefits. Then we contact the client either via phone or in-person and discuss several matters:

  • Review their benefits
  • Explain how the settlement is going to impact those benefits
  • Discuss how a special needs trust works and how it can protect those benefits

A special needs trust is not like a bank account that can be accessed by the client anytime. There are certain restrictions on the trust that they need to understand. One example is that they have to go through a trustee to access the funds in the trust for goods and services. Another important requirement the client needs to understand is the Medicaid Payback Provision.

Clients need to be educated on these matters for them to be comfortable with and understand how a special needs trust works.  We will help you and the client choose which trustee makes the most sense. Is there a family member that could do it, or is a professional corporate fiduciary better for their situation?

In addition, if we can identify the correct trustee for the trust, we can walk the client through budgetary concerns. We can create a sample budget so that they have a plan as to what the trust is going to pay for, what it cannot pay for, and how it will benefit them.

When a case is close to a settlement, give us a call. We can meet with your client, line them up with the correct trustee, and build a settlement plan. In the meantime, you can settle the case for cash and get it into your trust account. We can be drafting the trust, so we’re not slowing you down, and then we take care of establishing and funding the special needs trust using the funds in your trust account.

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