Establishing a trust for a special needs person in Maryland involves careful planning. You also need to make sure that you are fully in accord with state laws. It’s a good idea to confer with your financial and legal advisors before you undertake this activity. There are two major types of trusts to choose from.
Establishing a third-party special needs trust
The first of the two most common types of special needs trusts is known as a third-party special needs trust. In this type of arrangement, you will set up the trust in advance. You can include this trust in your last will and testament. You can also arrange for it to be a part of an inter vivos living trust in order to avoid probate.
The only drawback to including this type of trust in a will or living trust is that it cannot be used by the beneficiary until you have passed. Some people prefer to create a stand-alone trust with the input of several donors. This allows the beneficiary to draw from the trust while the creator still lives.
Establishing a first-party special needs trust
The second major type of estate planning for special needs is known as a first-party special needs trust. This type of trust is most often created when a person with special needs inherits money or property or receives them as part of a court settlement.
If a person becomes disabled, they can use this trust in order to qualify for certain types of public benefits. These are usually programs with strict income and asset guidelines.
This type of trust is funded via property that belongs to the beneficiary. It can also consist of assets to which the beneficiary is or may become legally entitled to.