Special Needs Trust
- What is a Special Needs Trust?
- When Might A Special Needs Trust Be Created?
- If having money will cause problems for my disabled child, can't I just leave that money to his brother and sister and ask that they look after their sibling?
- What government benefits can be coordinated with a Special Needs Trust?
- Does the existence of a Special Needs Trust qualify the beneficiary for public benefits?
- What is a “supplemental benefits” trust?
An Overview of Special Needs Trusts
A Special Needs Trust is a legal document designed to benefit a beneficiary with a disability. A Special Needs Trust can form part of a Last Will and Testament, but more often it is a document that stands alone. Congress mandates that Special Needs Trusts must be irrevocable to comply with applicable laws.
What is a Special Needs Trust?
A Special Needs Trust is a unique type of trust specifically authorized by Congress, that when properly drafted, may enable a person under a physical or mental disability, or an individual with a chronic or acquired illness, to hold, in Trust, an unlimited amount of assets, without those assets being considered countable assets for purposes of qualification for governmental benefits that are based upon need.
“Special needs” is just a term to describe any trust intended to provide benefits without causing the beneficiary to lose public benefits he or she is entitled to receive.
When might a Special Needs Trust be created?
It is very common for parents to create a Special Needs Trust as a means for holding assets to benefit disabled children after the parent’s death. The Special Needs Trust is an estate-planning tool of choice for those parents. Additionally, the disabled or chronically ill individual may at some time during his or her lifetime come into funds from third party sources which could include personal injury settlements, bequests from relatives or friends, Social Security or other types of insurance back payments, and the like.
If having money will cause problems for my disabled child, can't I just leave that money to his brother and sister and ask that they look after their sibling?
LEAVING MONEY TO OTHERS CAN CREATE SERIOUS PROBLEMS…
“Disinheritance” was commonly used before the use of Special Needs Trusts was ratified and confirmed by Congress.
Using disinheritance as a means of providing for a disabled or ill person as a way of preserving eligibility for governmental benefits puts the assets at risk. For example, a non-disabled sibling holding assets for the benefit of a disabled sibling could be subject to such liabilities such as judgments from automobile accidents, bankruptcies, divorce, etc.
In such circumstances, those assets that parents wish to specifically benefit a disabled or chronically ill child could go to pay the judgment creditors or the estranged spouse of the non-disabled sibling. Using a Special Needs Trust guarantees that the funds will be held only for the benefit of the person under the disability or chronic illness, and not for any other purpose whatsoever.
What government benefits can be coordinated with a Special Needs Trust?
Governmental benefits based upon need may include such benefits as Supplemental Security Income (SSI), Medicaid (called MediCal or other such names dependent upon the state), the expenses of vocational rehabilitation, subsidized housing, and other benefits traditionally provided to persons who are impoverished.
For purposes of a Special Needs Trust, an individual may be deemed impoverished if his or her assets are less than $2,000.00. The Special Needs Trust provides for supplemental and extra care over and above that which the government may provide, for persons under mental or physical disabilities, chronic or acquired illnesses.
Does the existence of a Special Needs Trust qualify the beneficiary for public benefits?
No. The existence of a Special Needs Trust does not itself make public benefits available; the beneficiary must qualify for the benefits program already, or qualify after the trust is established. If properly established, the special needs trust will not cause a loss of benefits (although in some circumstances the level of benefits may be reduced), but the trust does not make it easier to qualify.
What is a “supplemental benefits” trust?
Some lawyers prefer to use the term “supplemental benefits” rather than “special needs.” Occasionally the term “supplemental needs” is used. All are interchangeable, and describe the purpose of the trust rather than being a limited legal term.