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The benefits of a special needs trust

Pennsylvania residents can think of a trust as a relationship between three entities. There's the donor, who puts the funds into the trust; the trustee, who looks after the assets in the trust; and the beneficiary, who benefits from the assets in the trust. With that being said, a special needs trust is a unique type of estate planning tool that caters to people with disabilities who also receive benefits from the government.

Special needs trusts can be classified into one of three types: a first-party trust, third-party trust or pooled trust. Even though all of these types ensure that the person with special needs is the beneficiary and that the government benefits are not interfered with, there are slight differences between these trusts, especially when it comes to who the donor of the trust is as well as how the government treats the assets in the trust after the beneficiary passes.

With that said, the difference between these types of special needs trusts is quite easy to understand. To start with, the assets in a first-party trust are donated by the person with special needs themselves. The assets in a third-party trust are donated by the beneficiary's family and loved ones. As for a pooled trust, it contains the assets of more than one disabled individual and is usually maintained by a charity of sorts.

Naturally, each type of trust has its positives and negatives. For anyone planning to set up a special needs trust, it may be wise to reach out to a legal professional who can help sort matters out and indicate the best route to take.

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