Are you a parent of a child with special needs? You may need special estate planning. Why? What’s the benefit of estate planning that is geared specifically to meet special needs? One important reason is that if assets are left directly to your special needs child, either through a will or through intestacy, that inheritance received by your child can jeopardize his or her ability to receive benefits under government programs such as Supplemental Security Income or Medicaid.
A special needs trust can help preserve your child’s eligibility for public benefits while providing for supplemental needs that will enhance his or her life.
WHAT IS A SPECIAL NEEDS TRUST?
A Special Needs Trust also known as a Supplemental Needs Trust, is a discretionary trust created to hold the property of a disabled beneficiary and distribute supplemental funds to that individual in a way that preserves his or her eligibility for public benefits.
Below is a non-exclusive list of some types supplemental disbursements that are appropriate for a trustee of a special needs trust to make on behalf of a beneficiary:
- Health and dental treatment and equipment for which there are not funds otherwise available
- Rehabilitative and occupational therapy services
- Medical procedures, even though not medically necessary or lifesaving
- Medical insurance premiums
- Supplemental nursing care
- Supplemental dietary needs
- Eyeglasses
- Travel
- Entertainment
- Cultural experiences
- Expenses associated with bringing relatives or friends to visit with the beneficiary
- Vacations
- Movies
- Telephone service
- Television and cable equipment and services
- Training and education programs
- Reading and educational materials
Source: The Arc of Texas Master Pooled Trust
BENEFITS OF A SPECIAL NEEDS TRUST?
Supplemental Security Income (SSI), Social Security Disability Insurance (SSD), Medicare and Medicaid are government programs that offer support to disabled individuals. SSI is a needs-based program that is only available to people who meet certain income and resource limitations. In most states including Texas, people receiving SSI are automatically entitled to Medicaid.
To qualify for SSI and Medicaid, a single person must own less than $2,000 of countable assets. Those with countable assets greater than $2,000 can lose their eligibility for benefits. That’s why it’s generally a bad idea to give assets, either as a gift or inheritance, directly to a loved one who is disabled and receiving government assistance.
WHAT TYPE OF TRUST WILL WORK?
Not all trusts will work to preserve a disabled beneficiary’s benefits. Support trusts, which direct that funds be used for the health, education, maintenance, welfare, and support of a beneficiary, can disqualify a disabled beneficiary because the assets in a support trust are counted as the beneficiary’s resource.
A Supplemental Needs Trust is a discretionary trust that allows a trustee to use trust funds to supplement, not replace, a beneficiary’s government entitlements. To maintain eligibility for needs-based support, the beneficiary cannot have control over the assets in the SNT. The beneficiary cannot manage the assets, have the right to demand distributions of income or property from the SNT, name the Trustee or change the terms of the SNT. The use of the SNT’s assets for the benefit of the beneficiary is determined at the discretion of the Trustee.
Beneficiaries of properly drafted special needs trusts do not have legal claim to the property in the trust. That means that the trust assets are not countable resources and do not affect the beneficiaries’ eligibility for benefits. As a result, the beneficiaries are able to continue receiving government benefits, while still enjoying the benefits of the property in the trust for supplemental needs.
A special needs trust may help you provide for your child without jeopardizing his or her eligibility for benefits under SSI and Medicaid. If you are a parent of a child with special needs, it may be in the child’s best interest to consider forming a special needs trust as an essential part of your estate plan.
If you have questions relating to Special Needs Trusts and would like to schedule a consultation to discuss the benefits of this form of estate planning please contact Weldy Law, PLLC.
The above blog is for informational purposes only and is not legal advice nor does any information or communication with this website create an attorney-client relationship.