The requirements to set up a Special Needs Trust so that government benefit eligibility is preserved are technical. Distributions from the trust must be made by a properly advised trustee to avoid an unintentional loss of benefits. Funds from the trust cannot be distributed directly to the disabled beneficiary. Instead, funds must be disbursed to third parties who provide goods and services for use and enjoyment by the disabled beneficiary.
The Special Needs Trust can be used for a variety of life-enhancing expenditures without compromising your loved ones’ eligibility such as:
- Annual check-ups at an independent medical facility
- Attendance of religious services
- Supplemental education and tutoring
- Out-of-pocket medical and dental expenses
- Transportation (including purchase of a vehicle)
- Maintenance of vehicles
- Purchase materials for a hobby or recreation activity
- Funds for trips or vacations
- Funds for entertainment such as movies, shows or ballgames
- Purchase of goods and services that add pleasure and quality to life: computers, videos, furniture, or electronics
- Athletic training or competitions
- Special dietary needs
- Personal care attendant or escort
- Vacations, travel and personal enrichment
Some people may feel it is too complex and expensive to meet with an attorney to establish a Special Needs Trust and may consider disinheriting the person with special needs and/or leaving assets to a third party outright to hold for the person with special needs. This can be disastrous to the person with special needs because the recipient of the assets may not use them for the person with special needs or may use them in a way that will cause benefits to be terminated.
Depending on your unique circumstances there are different types of Special Needs Trusts available to supplement the quality of life for your loved one.
A First-Party Special Needs Trust can be created by the disabled individual (if competent), the probate Court, or a parent, Guardian or Conservator. You can place funds from the disabled individual into this special trust. This trust meets the immediate needs of your loved one and will assist to maintain their qualification for government benefits.
The disabled individual has no control over the use of the First-Party Trust funds. The trust must be carefully managed by the trustee to ensure that distributions from the trust do disqualify the disabled individual from existing governments benefits. However, any funds remaining in the trust after the passing of the disabled individual will be first used to reimburse the state Medicaid agency for expenses incurred on behalf of that individual. A beneficiary can be designated for any funds remaining after payback to the state Medicaid agency.
A Third-Party Special Needs Trust can be created by anyone with the intention of supplementing the needs of a disabled individual. This trust is typically created as part of a comprehensive estate plan to provide for the current or future needs of your loved one. This cannot hold earnings of the disabled individual or accounts owned by the disabled individual. The disabled individual has no control over the use of the funds in the Third-Party Special Needs Trust. The trust must be carefully managed by the trustee to ensure that distributions from the trust do not interrupt the disabled individual’s existing governments benefits. This trust does not require payback to the State Medicaid Agency and the grantor of this trust will designate a beneficiary to receive the balance of the trust after the passing of the disabled individual.
If you have disabled beneficiaries for whom you wish to provide after your passing, Special Needs Trusts are a critical component of your estate plan. Meeting with an experienced attorney in special needs will provide necessary advice and guidance to provide you with peace of mind.
Contact our office today to schedule a complimentary consultation to discuss the planning tools that would best meet the needs of your loved ones.