Special Needs Trusts
In a few words, a trust is a legal arrangement in which a person or firm (the trustee) manages money or property for the benefit of another person (the beneficiary).
A Special Needs Trust is a trust for a disabled person designed to preserve the disabled person’s eligibility for public benefits.
A Special Needs Trust is appropriate for a disabled person who receives means tested public benefits (usually SSI, Medicaid, VA benefits, housing subsidies, or other benefits), or who inherits money, or who receives a settlement or a gift.
Ordinarily, the receipt of funds causes the disabled person to be disqualified for his or her public benefits. Thus, the funds would have to be spent until exhausted to provide the same necessities that the public benefits were providing. After spending all of the money, the disabled person would again (presumably) qualify for their public benefits. Thus the receipt of the gift, inheritance, or settlement produces no permanent benefit for the disabled person. On the other hand, if the gift, inheritance, or settlement is placed in a Special Needs Trust, the disabled person can continue to receive means tested public benefits.
Yes. It stands to reason that if the funds in the trust were as easily available as they would be in a bank account there would be little reason the assets in the trust would not also disqualify the disabled person. For this reason, there are limitations on the purposes for which the funds in the trust can be spent; in general, the trust assets cannot be spent for food and shelter or other needs public benefits in general are intended to provide.
Since cash disqualifies many disabled persons from their benefit programs, Special Needs Trusts usually pay expenses for disabled persons and do not distribute cash to the disabled person.
Yes. The trust can also ensure that the settlement fund will be properly managed, often for beneficiaries who cannot manage large amounts of money themselves.
Supplemental needs are the needs other than the basic support needs of the disabled person (food and shelter). These can include modifications to make a residence appropriate for the disabled person; medical treatment and medical equipment not provided by public benefit programs; educational and recreational equipment, such as computers, musical instruments, and sports equipment; travel expenses; prepaid funeral arrangements; and recreational opportunities (just to name a few). Clothing was formerly prohibited, but now can also be purchased by a Special Needs Trust.
Estate planning for a couple with a disabled child usually involves planning for living arrangements and personal care needs for the disabled person and additional measures such as a Special Needs Trust to preserve the benefits of an inheritance for the disabled person for the longest possible time. Often the supplemental needs that such a trust will fund are carefully tailored to the disabled person’s anticipated needs.
Yes. The legal rules applicable to Special Needs Trusts are often very complex, and the advice of an attorney familiar with SSI, Medicaid, and other means tested public benefit programs is often essential to prevent distributions from inadvertently disqualifying the disabled person from such public benefit programs.
This website is designed for general information only and should not be construed to be legal advice or the formation of a lawyer/client relationship. You should consult a qualified attorney for individual advice regarding your own situation.