How Do I Set Up a Special Needs Trust in Maryland?

Trusts can be created for any legal purpose. People create trusts to provide money to loved ones, manage real property, reap tax benefits, and more. A special needs trust is a specific kind of trust that provides disability benefits to someone with a disability, either because they have no other support or so as to not interfere with means-based qualifications for SSI. People can set up special needs trusts, but it is also common for nonprofits or other organizations with a large amount of capital to create these trusts.

To set up a special needs trust in Maryland, you follow the same process you would use to create any other kind of trust: you make a declaration of trust and name a trustee and beneficiary. Accordingly, you need to understand how trusts are created generally in Maryland. For special needs trusts, there may be some special considerations, such as having an identifiable beneficiary or

To get a free analysis of your situation from our Maryland trusts and estate attorneys, call Rice, Murtha & Psoras at (410) 694-7291.

How Special Needs Trusts Work in Maryland

A trust is a formal relationship where a “grantor” sets up a trust that will be managed by a “trustee” to benefit “beneficiaries.” Trusts can be set up to do anything that is permitted by law. The only limits on what a trust can do are spelled out in the documents that create the trust.

What is a Special Needs Trust in Maryland?

A special needs trust is a trust where the goal is to provide financial assistance to someone with disabilities and other needs. These trusts generally have provisions in them that allow funds to be used for things related to the beneficiary’s disability. The idea is to make sure that the beneficiary has help with their finances, especially if they cannot manage them themselves.

Special needs trusts can help many disabled people who do not qualify for government assistance but still need help. Programs like SSI and SSDI have strict requirements that need to be met for people to qualify. Unfortunately, some people will not get the benefits they need from these programs. Special needs trusts, luckily, can pick up the slack. However, if you do qualify for any of these programs, a special needs trust might be even more important. With certain income and wealth limits placed on Medicaid and SSI recipients, getting the money outright might throw them out of these programs. However, when the assets are in a trust instead, they might be able to qualify for these programs and still draw additional aid from the trust without ruining their qualifications.

Steps for Setting Up a Special Needs Trust in Maryland

The steps for setting up a special needs trust in Maryland are more or less the same as setting up any other kind of trust. Our Maryland estate and trust lawyers will walk you through those steps, and we would be happy to assist you with creating a special needs trust in Maryland if you so desire.

Declaration of Trust

A crucial step in creating a trust is having a declaration of trust. This is a document that states the purpose of the trust, the grantor, trustee, and beneficiaries, and other details about the trust. Technically, a written declaration of trust is not needed to create a trust under Md. Code, Ests. & Trs. Art., § 14.5-406. However, it will be extremely difficult to prove that a trust even exists without written evidence, so our lawyers recommend always having a written declaration of trust.

Acts That Create a Trust

Per Md. Code, Ests. & Trs. Art., § 14.5-401, any one of several specific acts creates a trust. First, transferring property to someone else as a trustee creates a trust, which can be done while you are alive or in your will. Second, A property owner declaring that they hold certain property as a trustee creates a trust. Finally, trust can be created by exercising the power of appointment. This simply means that the grantor appoints a trustee. Although any of those methods can create a special needs trust, the most likely way out of the three would be simply appointing a trustee.

Trust Creation Requirements

There are additional requirements that need to be met in order to create a trust in Maryland, which are laid out in Md. Code, Ests. & Trs. Art., § 14.5-402. First, the grantor needs to have capacity to create a trust. Second, the trust needs an identifiable beneficiary. So, a special needs trust may not be able to be set up for “anyone with a particular condition.” It has to be set up for a specific individual.

Finally, the trustee must exercise some power given to them by the trust within a “reasonable” time. What is considered a reasonable time may differ from one trust to another, so you should talk to our attorneys about any concerns you have regarding your special needs trust.

How Are Special Needs Trusts Terminated in Maryland?

It is possible for a special needs trust to terminate in Maryland. Per Md. Code, Ests. & Trs. Art., § 14.5-406, a trust can terminate under a couple of different circumstances. First, if the beneficiary dies, the trust ends. This is because trusts exist for the beneficiary, so if there is no beneficiary, the trust doesn’t really have a point.

Second, if the trust specifies a certain thing that terminates the trust, it ends when that thing happens. For example, if a special needs trust could have a provision that terminates the trust if the beneficiary ever becomes no longer disabled or qualifies for assistance from a government program. You could also set up a trust to terminate when a disabled minor turns 18 or 21 so that they get the money in the trust outright when they come of age.

Once a trust is terminated, any remaining trust assets are transferred to a person designated in the trust documents. If there is nothing stated about where trust assets go, then they go to the transferor, or if the transferor is deceased, trust assets go to those parties specified in the transferor’s will.

Get Help from Our Maryland Trusts and Estate Lawyers Today

Our team of Baltimore trusts and estate lawyers is ready to assist you when you contact Rice, Murtha & Psoras by calling (410) 694-7291.