You may know that you need to set up a special needs trust for your disabled child, but once you start doing your research, you’ll find that there isn’t just one type of special needs trust.
What about court-ordered trusts? What are they, and how are they useful?
What Is a Court-Ordered Trust?
In contrast to a standard special needs trust (which is usually set up by the beneficiary’s parents for the purpose of providing additional funds while protecting their eligibility for government benefits), a court-ordered trust is only used in very specific circumstances.
If the beneficiary has inherited a sum of money, or if they have received funds through a court settlement, then a court-ordered special needs trust may be appropriate because these types of funds cannot be put into a standard special needs trust.
Upon the beneficiary’s death, any leftover funds from a court-ordered trust will be paid back to the state of residence. This number is calculated based on the amount of medical assistance the beneficiary received from the government.
In general, court-ordered special needs trusts are more restricted and more closely monitored than other types of trusts because their funds have come from some type of legal court proceeding as opposed to a personal transfer.
How Are Court-Ordered Trusts Set Up?
Usually, the process starts with some kind of court interaction or instructions about the funds that are going into the trust. Next, the trust must be drafted and established by another person for the beneficiary. There are only a few specific parties who can do this. They are:
- Legal guardians
- The court
- Parents of the disabled person (or, in some cases, a grandparent)
Additionally, the beneficiary must meet Social Security standards, they must be under 65 years of age, and their disability must meet various other requirements.
Hiring a Professional? Alabama Family Trust Is Here!
Like all types of special needs trusts, the process of setting up a court-ordered special needs trust is highly specific and layered with legal requirements. It is essential to have a professional draft and establish this trust for you so that it’s done properly. Contact Alabama Family Trust today for help with your special needs trust!