How to manage assets for special needs individuals

If the parent of a special needs child in North Carolina plans to leave that child an inheritance, it should be done in a strategic manner. Simply leaving the money directly to the child could result in that person losing his or her access to Medicaid and other types of government benefits. One way to protect assets while retaining some type of control over the money is to create a first-party special needs trust.

Once the trust is created, the trustee is the only person who is authorized to handle the money. The person with the special needs would have no authority to revoke the trust without first petitioning the probate court. If there is any money left in the trust when the beneficiary passes on, it must be returned to the government. Alternatively, a parent could setup a third-party special needs trust.

This trust would be funded with the assets of a third party as opposed to the assets of the beneficiary. Therefore, if there is anything left in the trust after the beneficiary passes on, it can go to whoever the trustee chooses. Like the first-party trust, the special needs individual could receive government benefits while retaining assets. The trust is still controlled by the trustee or multiple trustees if others are also designated to fill the role.

Engaging in trust planning may allow the family of a special needs individual to manage assets in a manner that allows the beneficiary to remain eligible for government benefits. An attorney may assist in creating the trust or assist in making changes to the trust if that is allowed.