Patricia Manko Tue, Jun 05, 2012 @ 05:06 PM 3 min read

Funding a Special Needs Trust : Part I

Establishing a special needs trust does not guarantee your loved one will be cared for.  The trust provides the framework or structure but the money used to fund the trust is what provides the security. 

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Trusts may be funded in various ways, either during your lifetime or upon your death.  You can transfer assets during your lifetime to a living trust or a revocable trust and still maintain access to these funds.  A revocable trust can be changed wihle you are still alive.  An irrevocable trust does not allow you any access to the funds in the trust.

If you and your advisors determine that it would be most beneficial to fund your special needs trust at your death, the following lists the more common ways to fund the trust:
  • Provisions of your will can provide direction to your executor to transfer money to the special needs trust.
  • You can name the special needs trust as a beneficiary of your life insurance policies, retirement accounts and annuities.
  • Ownership of certain investment accounts may allow transfer on death provisions to name the special needs trust.
  • Remember, it is important not to make distributions from the trust directly to the beneficiary.  All checks should be paid to either the service providers or vendors.

Because of the complexity and possible ramifications if mistakes are made in funding the special needs trust, either during your lifetime or upon your death, any and all funding strategies should be discussed with your financial, legal, and tax advisors to determine the most appropriate planning strategy to meet your needs.