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Should you set up a self-settled trust or a third-party trust?

| Jun 16, 2021 | Uncategorized

Choosing the right type of trust in Indiana can help you and your family get the most out of your money. Two types of special needs trusts that might be useful to you if you have a loved one with a disability are self-settled trusts and third-party trusts.

Protecting your child’s government benefits

A third-party special needs trust helps protect a disabled child’s government benefits. If you were to give a child who has special needs a standard inheritance after your death, their government benefits would stop. They would have to pay all of their medical expenses with their own money until it ran out. Only once they have no more money would they qualify again for government benefits.

Another benefit of setting up a third-party special needs trust for a disabled child is other relatives can deposit into the trust. This can help meet their needs even after you die. When the child dies, the remaining money goes to the other family members, so any extra money in the trust stays within the family.

Protecting your SSI or Medicaid

If you’re receiving a settlement from an accident, then you may want to put that money into a self-settled special needs trust. You could create a self-settled special needs trust and continue receiving Supplemental Security Income and Medicaid benefits.

This type of a trust is also an option even if you had the disability before you were injured. Upon your death, the remaining money goes to the government as a partial repayment for the services that it provided and that you received.