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By Harry S. Margolis and Eric Prichard
So which type of trust is the right one to
set up? Both, actually. The third-party trust is
important because you can place funds into it
while alive, and through your will, life
insurance policies and retirement accounts when
you pass away, and the funds can be used without
fear of government reimbursement. As for a
first-party trust, since only a parent,
grandparent or court can create it, we recommend
creating one at the same time as the rest of
your estate plan. Doing this ensures that the
trust is available if or when your child comes
into his own funds and needs to shelter them in
the trust.
A variation on the first-party trust is a pooled
disability or (d)(4)(C) trust. Like the first-party
or (d)(4)(A) trust, this trust is to be funded with
the beneficiary’s own funds, which fall under a
special safe-harbor in the law that permits their
creation and management by non-profit associations
for any number of beneficiaries. Unlike the
(d)(4)(A) trust, a disabled beneficiary herself can
fund such a trust without the participation of a
parent, grandparent, guardian or court. This can be
very useful when there is no appropriate trustee to
manage funds for a disabled beneficiary.
Harry S. Margolis is the
founder of ElderLawAnswers.com and co-founder of the
Academy of Special Needs Planners (ASNP). Special
needs planner Eric Prichard is a staff attorney with
ASNP. To find a well-qualified attorney who
specializes in helping families with special needs,
as well as additional background and news on special
needs planning, visit Special Needs Answers at
specialneedsanswers.com.
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