Disability lawyers help clients who have special needs, and we also help the families of people who have loved ones who are disabled. A special needs trust can often provide a solution. In this post, we will provide a basic overview.
Funding With the Beneficiary’s Resources
A first party special needs trust is a type of trust that could be used by someone who is disabled. People with disabilities often rely on government benefits that are only available to people who can prove that they have financial need.
One of them is Medicaid, which is a government run health insurance program. It is jointly administered by the federal government along with each state government.
You do not have to be disabled to qualify for Medicaid, but many people with special needs cannot work, so they do not have health insurance through their jobs. They have limited financial resources because they can’t earn income, so they qualify for Medicaid.
Another government benefit that is based on financial need is called Supplemental Security Income or SSI. This is a program that can provide an ongoing source of limited income for qualified disabled individuals.
Sometimes a person with a disability will have his or her own financial resources. These assets could come from personal earnings prior to disability, they could come from a personal injury settlement, or they could come from an inheritance or from life insurance proceeds.
A legal guardian, a parent, or a grandparent could create a first party special needs trust and fund the trust with these assets. These trusts are alternately referred to as self-settled special needs trusts.
The person with a disability would be the beneficiary of the trust. A trustee that is named in the trust declaration would be empowered to administer the assets in the trust. The beneficiary could not directly control the assets.
Government benefits pay for certain things, but they do not necessarily cover all of the needs of recipients. Under benefit program rules, when a first party special needs trust has been established, the trustee can use assets in the trust to satisfy these unmet needs.
Assets in the trust could be used to provide recreation, entertainment, and travel. Computers and computer equipment, electronics, insurance, dental care, and education could also be provided through the utilization of assets that are contained in the trust.
These are a handful of examples, but there are many other needs that can be satisfied. As long as the expenditures are within the guidelines, eligibility for the benefits would not be lost.
However, you have to be aware of Medicaid reimbursement. After a first party special needs trust has been created, the Medicaid program will seek recovery from the estate of the beneficiary after his or her death.
Outside Funding
There is another type of special needs trust that is called a third-party special needs trust. If you wanted to establish and fund a trust for the benefit of a loved one with special needs with your own resources, it would be a third-party special needs trust.
Everything is exactly the same with regard to the trustee’s ability to use assets in the trust to make the beneficiary more comfortable without impacting eligibility for Medicaid and Supplemental Security Income.
However, there is one key difference. During Medicaid recovery efforts, any assets that may remain in the special needs trust would be protected. Medicaid could not go after the remainder that is left in the third party special needs trust.
Free Special Needs Planning Report
You should certainly have a thorough understanding of government benefit program rules and regulations when you have a person with special needs in the family. As you may imagine, these rules are rather complex, so there is a learning curve.
We have a valuable resource that you can access through this website if you would like to obtain detailed information about Medicaid, Supplemental Security Income, and special needs trusts.
Our firm has prepared a series of in-depth special reports that cover numerous different estate planning and elder law topics. You can obtain a copy of any or all of these reports.
One of our reports is specifically focused on the subject of Supplemental Security Income, Medicaid, and the strategies that disability lawyers implement to preserve benefit eligibility.
This meticulously prepared report is being offered on a complimentary basis at the present time, so you can obtain a great deal of useful information without reaching into your pocket. To get your copy of the comprehensive special report, visit this page and follow the simple instructions: Indianapolis, IN Special Needs Planning.
Paul A. Kraft, Estate Planning Attorney
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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