Everything You Need To Know About A Special Needs Trust

Special Needs Trusts are specialized trusts designed specifically to hold assets in a way that enables the beneficiaries to retain or receive public benefits including SSI or Medicaid. A special needs trust manages its assets by a private or professional trustee and uses the assets to maintain and enhance the beneficiary’s quality of life by enabling him or her to purchase products and services that are not covered by government funds. To complicate matters further, there are several forms of special needs trust.

The assets that are placed into a trust plan properly drafted and executed for a special-needs child are never countable by Medicaid or SSA. A special needs trust may hold an unlimited amount of assets. Many elder law clients come in with a special needs trust already in place. The elder law attorney must review these trusts to make sure they do not conflict with Medicaid requirements (as they sometimes do).

Who Should Have a Special Needs Trust?

People with disabilities may require various forms of support throughout their lives. People with a serious disabilities often cannot find work that offers health insurance, making health insurance a particularly important issue. Because of this, it is essential to enroll in Medicaid, a federal-state program. However, Medicaid only offers benefits to those with extremely limited incomes and resources. Children with disabilities often cannot qualify for Medicaid if their parents leave them assets.

This is where special needs trust comes into play. If funds are left in trust for a child, rather than directly to the child, parents won’t affect the child’s benefits eligibility. Trust funds are under the control of a trustee appointed by the parents. The child has no control over the funds. Medicaid eligibility will not be affected even by trusts with hundreds of thousands of dollars in assets. The trust funds are not considered assets of the beneficiaries in terms of the language used by the government.

What the Trust Does

The Special Needs Trusts is structured according to three roles:

  • An individual who creates a trust and provides money to it (also known as a settlor)
  • An individual with a disability (the beneficiary)
  • A trustee manages the funds on behalf of the beneficiary.

A trust can be created while the parents are alive, or through provisions in their will, it can come into existence when they die. In most cases, the parents choose a family member or close friend who knows the beneficiary well to be the trustee.

The Benefits Of Establishing A Special Needs Trust

You can enhance the quality of life of someone with special needs by setting up a special needs trust. A functional trust ensures that a person with disabilities receives financial assistance throughout their lifetime regardless of whether they are alive or not.

Special needs trusts offer the following benefits:

  • Even if your loved one is in need of government assistance, they can still receive it.
  • There are cases when creditors or lawsuit winners cannot access the assets or funds in the trust.
  • Trustees or financial advisors can invest trust funds.
  • When your beneficiary dies, you may be able to choose who inherits the trust when they are gone.
  • Trusts protect beneficiaries against financial abuse because trustees are responsible for acting in the beneficiary’s best interest.

What Are The Benefits Of Setting Up A Special Needs Trust?

As the primary purpose of SNT is to provide future welfare maintenance for a dependent without disqualifying the beneficiary from government assistance programs, it is also to be able to provide future income to the beneficiary.  The rules of trusts are similar to many other types of trusts in that the funds within the trust are protected from creditors such as landlords, credit card companies, and even other lenders.  One or more trustees oversee and manage the assets of the SNT, and these trusts are typically managed by family members and trusted professionals who are independent of the SNT. Additionally, when it comes to third-party trusts if any funds remain in the trust after the beneficiary’s death, the person who set up the trust (the grantor) usually determines how those remaining funds are used