Special Needs Trust
It is estimated that 43,000,000 Americans have one or more physical or mental disabilities. It is important that a family who has a special needs member consult with an expert in this area
considering the numerous challenges that the family undertakes in protecting that person’s best interests. This can range from Powers of Attorney and Living Wills, to a curator proceeding
so that someone can be appointed to represent the disabled person, to the potential use of a Special Needs Trust.
If you have a loved one that is on a Medicaid provided assistance program, it is imperative that your estate planning be coordinated in a manner that will not jeopardize the government
benefits available to your loved ones who have special needs. In particular, our firm can establish a Special Needs Trust so that any lifetime donations or bequests by will that you leave
to such person will not jeopardize the Medicaid benefits to which they are entitled. Further, if the assets belong to the special needs person then those assets can be contributed into a
different type of Special Needs Trust, but this Trust that is funded with the disabled person’s assets is required to repay the government upon the death of the disabled person.
A special needs trust is designed to supplement certain governmental benefits that individuals with disabilities are entitled to. The primary purpose of a special needs trust is that it enables individuals with disabilities to maintain eligibility for governmental benefits (i.e. Medicaid and Supplemental Security Income (SSI)), while at the same time being able to have those individuals’ “supplemental needs” provided for through the special needs trust.
Considerations before establishing a special needs trust:
- Whose funds will be used to fund the trust, the individual or a third party?
- Who will be the alternative or successor beneficiary of the trust?
- Will the trust need to be established with or without court authorization?
- Who is creating the trust and what is the age of the disabled individual?
Types of special needs trust (SNT):
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Self Settled SNT
- A trust containing and/or funded with the assets of the disabled individual. (i.e. Damage awards from personal injuries; assets inherited by operation of law, by the disabled individual; VA benefits, and spousal and child support payments.)
- Must be established for a disabled individual who has not attained the age of 65 years.
- Must contain a “payback” clause whereby upon the disabled individual’s passing, the State’s Medicaid agency will receive all amounts remaining in the trust equal to the total medical assistance paid by the State.
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Third Party SNT
- A trust that is funded with the assets of a third party. (i.e. Inter vivos donations made to the disabled individual; donations passing to the disabled individual through a last will and testament)
- Must be established for a disabled individual who has not attained the age of 65 years.
- No requirement for a “payback” clause.
What can a SNT pay for?
A SNT is allowed to pay for the following items without incurring the loss of governmental benefits: (Please note that this list is illustrative only and not exclusive)
- Medical treatment for the individual that is not covered by Medicaid. This includes physical therapy, water therapy, and other treatments as long as they are beneficial to the individual.
- Recreational items for the individual, such as hobby kits, videos, music, books.
- Lawn services, house services and maintenance, plumbing and electrical services that will benefit the quality of life of the individual.
- School tuition, books, vocational tuition, and other educational related expenses for the individual.
- A vehicle or accessories to a vehicle that is customized to meet the individual’s medical needs. (Such as a wheel chair accessible van)
- One vehicle up to a $4,500 present cash value.
- Repairs and renovations to the individual’s home that will enhance his/her quality of life.
- Entertainment expenses such as tickets to sporting events, movies or concerts.
- Travel expenses for the individual, both local travelling and vacations. It is important to note that any fares purchased by the SNT cannot be cash refundable fares.
- Dental fees and other personal hygiene fees and costs.
- Professional fees incurred on behalf of the SNT and the individual, such as accountant fees, legal fees, and medical fees.
A SNT is also allowed to purchase a residential home for the individual since a home is considered an exempt resource.
What a SNT cannot pay for?
- Cannot pay for food, clothing and shelter. These distributions should not be paid from the SNT funds because they are supposed to be provided for through the individual’s governmental assistance payments.
- Mortgage payments, utilities and medical treatment provided by Medicaid.
- Cannot pay for pleasure vehicles used by the individual.
- The trustee of the SNT should never give the individual cash to pay for any items because this will result in a dollar for dollar reduction in the SSI the individual receives.
For more
information regarding this important planning opportunity please contact our office. |
