What is an Estate Planning Special Needs Trust?

Special Needs Trust

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Supplemental Needs Trust aka Special Needs Trust for a family member.

If you want to leave money or property to a loved one with a disability, you must plan carefully. Otherwise, you could jeopardize your loved one’s ability to receive Supplemental Security Income (SSI) and Medicaid benefits. By setting up a “special needs trust” in your will, you can avoid some of these problems.

Special Needs Trust

What is an Estate Planning Special Needs Trust?

A Special Needs Trust is a special trust that holds title to the property for the benefit of a child or adult who has a disability without interfering with eligibility for public benefits. The Special Needs Trust can provide for the needs of a person with a disability and supplement benefits received from various governmental assistance programs, including SSI and Medi-Cal. A trust can hold cash, real property, personal property, and beneficiary life insurance policies.

Owning a house, a car, furnishings, and typical personal effects do not affect eligibility for SSI or Medicaid. But other assets, including cash in the bank, will disqualify your loved one from benefits. For example, if you leave your loved one $10,000 in cash, that gift would disqualify your loved one from receiving SSI or Medicaid.

How a Special Needs Trust Can Help

A way around losing eligibility for SSI or Medicaid is to create a special needs or supplemental needs trust. Then, instead of leaving property directly to your loved one, you leave it to the special needs trust.

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You also choose someone to serve as trustee, who will have complete discretion over the trust property and will be in charge of spending money on your loved one’s behalf. Because your loved one will have no control over the money, SSI and Medicaid administrators will ignore the trust property for program eligibility purposes. The trust ends when it is no longer needed — commonly, at the beneficiary’s death or when the trust funds have all been spent.

Who can establish a Special Needs Trust?

Parents (or other family members or friends) of a disabled person can establish a Special Needs Trust as part of their estate plan. The parents or loved one can “pour-over” the person with disabilities share of their estate into the special needs trust and remain assured that they will have funds available to provide for their needs that are not covered by government benefits, even after their deaths.

Who will manage the Trust assets?

The manager of a trust is called a “trustee.” The trustee can be over eighteen years of age, a family or friend, a bank, pooled trust, or a professional fiduciary. The trustee holds, administers, and distributes all property allocated to the trust for the benefit of the disabled person during their lifetime.

How Trust Funds Can Be Spent

The trustee cannot give money directly to your loved one, which could interfere with SSI and Medicaid eligibility. But the trustee can spend trust assets to buy a wide variety of goods and services for your loved one. Special needs trust funds are commonly used to pay for personal care attendants, vacations, home furnishings, out-of-pocket medical and dental expenses, education, recreation, vehicles, and physical rehabilitation.

Pooled Trusts

Consider a ” pooled trust ” if you can’t come up with an excellent candidate to serve as a trustee or are leaving a relatively modest sum and don’t want to set up a separate special needs trust, consider a “pooled trust.” These are special needs trusts run by nonprofit organizations that pool and invest funds from many families. Each trust beneficiary has a separate account. The trustee chosen by the nonprofit spends money on behalf of each beneficiary. Pooled trusts (also called community trusts) are available in many areas of the country.

Will You Need a Special Needs Trust Attorney?

Some Trust lawyers will tell you that only an attorney can draft a special needs trust. But you can create a special needs trust yourself, with the proper guidance.

Of course, there are times when you should seek an attorney’s advice. For example, you must see a lawyer if you want to create a trust funded with the beneficiary’s own money (for example, a settlement from a personal injury lawsuit) rather than your money. Complicated and state-specific rules apply to these kinds of trusts.

Where can I find a knowledgeable Special Needs Trust attorney?

Almost any estate planning attorney can create a special needs trust. Still, few have experience with laws and regulations that affect trust creation and administration. Nevertheless, finding a knowledgeable special needs trust attorney is calling Steve Bliss Today!