Special Needs Trusts and Minor’s and Educational Trusts
Special Needs Trust
Special Needs Trusts are generally established for a specific purpose, such as to meet the varying needs of a disabled child.
Special Needs trusts are funded from two main sources. The first type of Special Needs trust is set-up by a family member, usually a parent, to provide for a disabled child. These are often funded with life insurance on the life or lives of the parents(s). When the parents die, the insurance proceeds will fund the trust and provide for the ongoing care of the disabled child.
The second type of Special Needs trust is funded with proceeds from a lawsuit. These trusts are usually designed to provide for the needs of a child or disabled person without causing them to be disqualified from any governmental assistance to which they may be otherwise entitled.
Minor’s Trusts / Educational Trusts
Features & Use
Controls gifts to child under annual gift tax exclusion, providing asset management until child reaches age of majority.
Advantages
Undistributed income taxed at trust rates.
With consent of beneficiary, trust can continue after child reaches age of majority.
Disadvantages
Child has full control of assets at age of majority.
Donor receives no income from the assets held in the trust.