What is the best type of trust fund?

My niece is 18 years old and intellectually disabled. She is about to inherit a large sum of money from a medical lawsuit. The attorney for the lawsuit suggested to set up a trust fund. Which type of trust fund is best in this situation? Her mom is not comfortable allowing the attorney to be trustee. What do you think about the bank as the trustee with a relative as the co-trustee?

Financial Planning
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June 2016

In my opinion, a qualified elder law attorney should answer this question. Although I am not an attorney, from my experience a supplemental needs trust (also known as a "special needs trust") makes sense in this situation. 

Special needs trusts are specifically designed for individuals with disabilities, physically and mentally challenged. It also helps to not disqualify her from needs-based government benefits (such as Social Security, or Medicaid for long-term care). The trust should be irrevocable, so it is not counted as a personal asset.

As far as the attorney or bank as the trustee (with a relative as a co-trustee), that decision will have to be made regardless. In my opinion, mismanagement can happen either way. However, there should be no conflicts of interest when making investment decisions, and unfortunately, that won't be the case working with a bank.

If you have any further questions, I'd be happy to help.

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