You may have heard of a Special Needs Trust, but do you fully understand what it is or how it can be beneficial? Over the years, we’ve had the privilege of working with multiple families of special needs individuals to establish this type of trust. Let’s cover a few of the most common questions we are asked:
1. What is a Special Needs Trust? A Special Needs Trust is a legal tool established specifically to benefit someone with physical and/or mental disabilities. These trusts are used to provide financial support for the individual with the disability.
2. What are the benefits of a Special Needs Trust? By using a Special Needs Trust for a disabled individual, a family member or friend can establish a fund that will be used to provide comfort care items to a disabled person, without jeopardizing that individual’s eligibility for government assistance. Without a Special Needs Trust, substantial financial gifts made to a disabled person, even those provided for in a trust established for their benefit, could disqualify them from receiving government benefits for which they would otherwise be eligible.
3. Can the beneficiary (the disabled individual) access the funds in the Special Needs Trust? No, a Trustee is appointed when the trust is established who is solely responsible for buying services and products for the individual, like vacations, home furniture and supplies, medical and dental expenses, educational expenses, vehicles, personal care attendants, etc. If the disabled individual were to have direct access to the funds in the Special Needs Trust, he/she could be disqualified from government benefits.
4. Who can set up a Special Needs Trust? Anyone may establish a “third party” Special Needs Trust for the benefit of a physically and/or mentally disabled person. You need not be a relative of the individual. A “first party” Special Needs Trust or a “payback trust” is established by a disabled individual or a conservator on their behalf and holds assets that belong to the disabled person, who must have special needs and be
under the age of 65. A pool trust is the third type of Special Needs Trust and grants a non-profit organization/charity permission to manage Special Needs Trusts that allow multiple beneficiaries to combine their resources for investment purposes, while maintaining separate accounts for each beneficiary’s needs.
5. What happens to the remaining money in the Special Needs Trust once the disabled person dies? If the original Special Needs Trust was a “first party” trust, then SSI or Medicaid will require a payback of all expenses advanced for the care of the disabled person during their lifetime before any funds can be distributed to the remainder beneficiaries named under the trust. If the original Special Needs Trust was a “third party” trust, then the trust will stipulate how and to whom the remaining assets should be distributed. If a pooled Special Needs Trust was used, the remaining funds are used to reimburse the government to pay back SSI or Medicaid for all expenses advanced for the care of the disabled person during their lifetime, but the charity is allowed to keep a portion for their trust management services.
6. How do I set up a Special Needs Trust? Due to the possible risk and complexity of this type of trust, it’s advisable to seek legal counsel from an attorney with solid experience preparing Special Needs Trusts. Not just any trust will work as a Special Needs Trust. To qualify as a Special Needs Trust, a trust must contain certain and specific language. Otherwise, you risk disqualifying the disabled individual from their government resources.
If you need assistance with a Special Needs Trust, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on estate planning, Medicaid and long-term care planning, Special Needs planning, business formation, family business/small business succession planning, probate, trust administration, real estate, and related matters.
NEWS YOU CAN USE
Davis & McCann, P. A.,