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Understanding special needs trusts in Colorado

On Behalf of | May 16, 2024 | Estate Planning |

Special needs trusts in Colorado help protect the financial future of individuals with disabilities.

Establishing a special needs trust provides a way to manage assets without jeopardizing benefits. Moreover, these trusts ensure funds are used for the beneficiary’s best interests, such as medical expenses, education and recreational activities.

First-Party

First-party special needs trusts hold assets belonging to individuals with disabilities. This type often receives funding from personal injury settlements, inheritance or savings. The law requires that any remaining funds in the trust repay Medicaid for the cost of services provided upon the beneficiary’s death.

Third-Party

Third-party special needs trusts involve funds from someone other than the beneficiary, typically a family member. These do not have a Medicaid payback requirement, allowing the remaining funds to go to other beneficiaries or charities. This type of trust can receive contributions from multiple sources and is a flexible option for long-term planning.

Pooled

Pooled trusts combine the resources of multiple beneficiaries for investment purposes. Nonprofit organizations usually manage pooled trusts, ensuring professional administration. Each beneficiary has an individual account, but the trust pools the resources to increase investment potential. This type provides a cost-effective solution for individuals needing more substantial assets.

Creating a Trust

Creating a special needs trust involves selecting a trustee who will manage the trust according to its terms. The trustee manages investments, makes distributions and complies with relevant laws and regulations.

Setting up a special needs trust requires careful planning and consideration of the beneficiary’s needs. Properly established, a special needs trust offers peace of mind, knowing that loved ones with disabilities will have financial support and access to services.

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