Special Needs Trusts

What to do in the event of an expected or unexpected family inheritance. If you are a family with a loved one receiving Medicaid or SSI?

While it is generous of family members and loved ones to write your child into their Will –did you know they may be doing more harm than help?  As a caretaker to your loved one with Special Needs you are familiar with Medicaid or Supplemental Security Income requirements to qualify for these benefits being established on income of less than $2,000.00 a month.
Our firm sees examples time and again where an inheritance has placed a recipient of those benefits in a place of jeopardy because the amount of inheritance causes the individual to be above the means-tested amount to qualify for these type of public benefits.

What can you do?

The law has created what is termed as A Special Needs Trust (SNT), sometimes referred to as a Supplemental Needs Trust.  These trusts are a legal vehicle that enables assets, (such as inheritance) to be held on behalf of your loved one with disabilities without affecting their eligibility for means-tested public benefits such as Medicaid or Supplemental Security Income. These assets held in these types of trusts are not “countable” for the purpose of qualifying for such programs, there are strict regulations regarding disbursements. SNTs are meant to supplement the funds and services available through government programs.

What is the difference between a Special Needs Trust and a supplemental needs trust?

A Special Needs Trust is created with assets belonging to an individual with disabilities, who becomes the “beneficiary.” Such funds typically consist of a personal injury settlement or inheritance. Sometimes it is termed, “First Party Special Needs Trust”. Additional requirements include that the person creating the First Party Trust must be under 65 at the time that the trust is established. Funds remaining in the trust at the beneficiary’s death must be used to reimburse Medicaid for services to that individual before they can be distributed to anyone else.

A Supplemental Needs Trust is created by a third party (such as parents, other relatives or friends) with assets for the benefit of the loved one who is the beneficiary of the trust. Such a trust can be created and funded during the life of the originator (“inter vivos”), or as part of a last will and testament (“testamentary”). Upon the beneficiary’s death, there is no requirement to use residual funds to reimburse Medicaid for services provided to the individual, and “remainder” beneficiaries may be named to receive those assets.

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