If you have a loved one with special needs, you may need to take certain steps to protect them in the future. This is because failing to properly plan can mean unintentionally disqualifying your loved ones from the government benefits they need. One way to avoid this is by creating a special needs trust. Read on to learn more about special needs trusts in Pennsylvania.
What Types of Special Needs Trusts Are Available in Pennsylvania?
The following types of trusts are available in Pennsylvania:
First-Party Special Needs Trusts: These trusts can only be created by a parent, grandparent, or legal guardian, and may only be funded by the beneficiary’s funds. For eligibility, the beneficiary has to be under the age of 65. Notably, these types of trusts are irrevocable. Generally, first-party special needs trusts are created when a beneficiary is to receive or inherit funds through a lawsuit or settlement.
Third-Party Special Needs Trusts: These trusts are created by another person for a beneficiary. Generally, these trusts are funded through life insurance, and they may begin either during a lifetime or at the time of death. Additionally, family members may contribute gifts toward these trusts.
Pooled Account Trusts
A Pooled Trust is established by a non-profit organization for the benefit of a disabled person and his or her family. The non-profit organization pools, manages, and invests the funds and controls payments. This type of account is used to supplement expenses other than basic needs provided for by government benefits.
These are savings accounts for disabled individuals and their families that have certain tax advantages. Contributions can be made to the account by anyone using post-taxed money. Notably, these funds are not deductible on federal tax returns, although some states may allow deductions. Additionally, income earned from these accounts is not taxable.
If you have any questions or concerns about planning for a loved one with special needs, reach out to our firm today. We are here to walk you through the process every step of the way.
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