Special Needs Trusts

Special Needs Trusts

 

 

A special needs trust- sometimes called a “supplemental needs trust” makes it possible to provide for the needs of a disabled person without disqualifying him or her from benefits received from government programs such as Social Security and Medicaid.

Government Benefit Requirements

In order to qualify for the Social Security Administration’s Supplemental Security Income (SSI) Benefits, a disabled adult cannot own more than $2,000 in assets, excluding a car and a home. SSI benefits, which are currently $750 per month, must be spent on food, clothing and shelter expenses.

Eligibility for SSI normally makes a disabled person eligible for Medicaid, which pays medical expenses, nursing home care and mental health services.  Medicaid eligibility also makes a disabled person eligible for many local community services, as well. As these benefits add greatly to a disabled person’s ability to care for him or herself, you wouldn’t want to give your disabled child property that would disqualify him or her from receiving these benefits.

Bequeathing To Other Family Members

While it might seem like a good idea simply to leave a set amount of money to your disabled child’s sibling or other close relative, with the understanding that the money will be spent on the disabled child, this often backfires:

  • The money can fall prey to judgments or divorce settlements against the relative, or can be lost in bankruptcy
  • The relative cannot be legally forced to use the money to benefit the disabled person
  • Should the relative die before the disabled child, the money would go to his or her heirs

A special needs trust avoids these potential problems without putting an emotional strain on family relations. Monthly SSI benefits can be spent on food, clothing and shelter. The special needs trust money can then go toward little extras that make your disabled child’s life more rewarding, such as:

  • Summer camp
  • Airline tickets for travel
  • Electronic video games
  • Vitamins and grooming supplies

Special needs trust money can also be spent for final funeral and burial expenses.

Picking a Trustee

The trustee for a special needs trust for your disabled child could be:

  • A trusted family member who is close to your child
  • A family friend who is close to your child
  • A bank or other financial institution, who will take a percentage of the trust assets for administering the trust

Special Needs Trust Language

To be effective, a special needs trust document:

  • Should be titled a “Special Needs Trust for Your Child’s Name”
  • Must have language that makes it impossible for your disabled child to demand that the trust funds be distributed
  • Must make it clear that the trust isn’t intended to be a basic support trust, but that the money is intended to be used solely to supplement benefits that are otherwise available to your child
  • Should specify that the trust is to be administered so that eligibility for government benefits is not jeopardized

Funding A Special Needs Trust

A special needs trust can be funded through a will or gifts from yourself, relatives and friends made directly to the trust instead of to your disabled child. Many special needs trusts are funded through “survivorship” or “second-to-die” life insurance policies that cover both parents and pay out on the death of the second parent.

Letter of Intent

One way to be clear about what you intend for your disabled child’s future is to write  a “Letter Of Intent” to be given to his or her trustee at the time of your death. This document gives family members and others the benefit of your knowledge about your child’s capabilities, needs and fears, and can be updated periodically. A letter of intent should include:

  • Biographical info
  • Financial details
  • Medical history and needs
  • Social contacts
  • Any negative influences you’d like to guard against
  • Personality traits
  • Skills, hobbies and physical abilities
  • Goals your child is working toward.

FAQs About Special Needs Trust:

What is a Special Needs Trust?

Why not just Disinherit a Child with Special Needs?

Can a disabled person create a special needs trust with their own funds and still be eligible for Medicaid and SSI?

What are the Advantages of a Special Needs Trust?

Special Needs Trusts also may allow a trustee to give the beneficiary money for:

What Expenses Can’t a Special Needs Trust Pay for?

Will trust income affect SSI eligibility?

How Do You Choose a Trustee?

How can I fund a special needs trust?

Can others contribute to my child’s special needs trust?

Why is it important to work with an Attorney who specializes in Special Needs Trusts?