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:
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:
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:
Special Needs Trust Language
To be effective, a special needs trust document:
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:
FAQs About Special Needs Trust: