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Special Needs Trusts

special needs trusts attorneySpecial needs trusts, also known as “supplemental needs” trusts, are legal arrangements that allow disabled individuals to inherit funds without compromising their government benefits.

Most people do not realize that an inheritance can cause disqualification of financial benefits for a person who receives government disability assistance. Under current law, anyone who receives more than $2,000 is no longer eligible to receive federal disability aid – including Medicaid.

That means without proper planning, a well-intentioned bequest to a disabled family member can turn into a liability that blocks access to crucial health benefits, exhausting finds that could be used for the benefit of the disabled individual or other family members.  A special needs trust avoids this drawback by:

  • Establishing a trustee who can manage the assets for the beneficiary. Government rules state that a disabled person cannot have a trust, so the special needs trustee assumes responsibility and authority of the trust.
  • Purchasing items or services that government assistance does not cover. This point is particularly important, because the intent of a special needs trust is to supplement government benefits, not duplicate them. For example, the trust might enable the beneficiary to purchase special medical equipment that Medicaid doesn’t cover, or pay for a home health care nurse. Special needs trusts can even help the beneficiary purchase a home or buy clothing. The funds just can’t be used for the same needs that the government aid already covers.

In essence, Special Needs Trusts are used to preserve or establish eligibility for certain governmental benefits, such as Medicaid and SSI, which are provided to disabled individuals who fall within very strict income and asset qualifications.

For example, if parents of a disabled child distributed assets outright to a child upon their deaths, the child would not be eligible for Medicaid and SSI until the inheritance was almost completely exhausted. If, instead, the parents had their estate planning attorney establish a a special needs trust to be funded in the event of their deaths, the child would maintain eligibility for federal and/or state programs and the funds distributed to the trust could be used to supplement the basic living expenses and medical care provided by governmental benefits.

When properly established, a special needs trust can make a very significant difference in the beneficiary’s life on a daily basis. Among the common uses for assets which distribute to special needs trusts are:

  • Education;
  • Counseling;
  • Medical equipment
  • Home health care;
  • Insurance;
  • Transportation;
  • Computers and other electronic equipment and appliances;
  • Recreation – vacations, entertainment, and other expenses.

How does a special needs trust work? The person leaving the money, also known as the grantor (for example, a parent), appoints a trustee who is responsible for managing the assets, making purchases for the beneficiary, and helping the beneficiary apply for government assistance.

Although the trust is established for the person with the disability, only the trustee has access to and authority over the trust. The trust can be established to last for the beneficiary’s lifetime or for a set period (if, for example, the beneficiary will be able to manage without assistance at some future time).

In some instances, the disabled person creates the trust, also known as a “self-settled” special needs trust. Self-settled trusts are often established by people who have become disabled in an accident or because of an injury or incapacity resulting from medical malpractice, and who received a financial settlement for their injuries.

Knowing that the person you care about is provided with adequate financial protection for many years to come, and that the assets you set aside in a Special Needs Trust are being managed according to guidelines you established in advance, can provide long-term peace of mind for all individuals concerned.  At The Levin Law Firm, we are experienced in drafting and administering Special Needs Trusts, including self-settled trusts, established by the benefits recipient, and special needs trusts created by a parent, grandparent, or guardian for minor children as well as adults who have special needs.

Please contact The Levin Law Firm to arrange a meeting to discuss your particular situation at (610) 977-2443.