Outlook Money
A special needs trust is a legal setup that allocates assets to support the care of an individual with special needs while ensuring their eligibility for government benefits remains unaffected.
There are various types of trusts in India such as public trusts which benefit the masses, charitable trusts which are for religious and social causes, and special needs trusts are usually private trusts created to benefit individuals with a disability.
A special needs trust is set up by a trust deed which defines the purpose, assets, trustees, and beneficiaries. Assets are moved into the trust, which can be done either during the lifetime of the parents (or the settlor) or through a will. Once in the trust, these assets are officially under the trust's ownership, and a trustee manages them based on the instructions to ensure they benefit the beneficiary.`
When creating a Special Needs Trust, parents need to keep in mind the following things which include the purpose of the trust, identifying the trustee, preparing the trust document and registration of the trust.
The Indian Trusts Act of 1882 and the Rights of Persons with Disabilities Act of 2016 collectively offer legal backing for special needs trusts. Section 80DD of the Income Tax Act grants tax relief for two consecutive years, or the previous year and one of the two following years.
The checklist includes verification of parents, finding persons with special needs, direct cash distributions to the beneficiary and the effectiveness of the funding level.