The goal of a special needs trust is to provide disabled recipient assets without it affecting their government benefits. Assets placed in a Special Needs Trust, are not considered a “countable asset” by Social Security. This means that property in a Special Needs Trust will not affect eligibility for government benefits. Additionally, assets in a Special Needs Trust are protected from lawsuits and creditors.
As more people become aware of the importance of setting up a special needs trust, there is a need to become educated on how a special needs trust can be used to provide for the care of a loved one living with a disability. A special needs trust is a useful tool when one knows how to utilize it. If you're a bit confused on the subject, we've provided explanations on what a special needs trust is, why you may want to create one for your loved one(s), and how to go about implementing one.
A Special Needs Trust is usually created to provide financial assistance, appoint successor Trustees, maintain government benefits, and protect the assets left for the person living with special needs. It is important to note that not all assets pass by your Will. Life insurance, retirement plans, and annuities pass by the beneficiary designation of each policy or plan. It is therefore important to check how each asset in your estate will be transferred after your death and to whom.
Note that an individual becomes ineligible for SSI and/or Medicaid if they own or have access to assets valued above $2,000. If these assets are held in a properly drafted special needs trust, they are not considered to belong to the person and thus, benefits can be maintained. Assets in a special needs trust are to be used for the benefit of the disabled beneficiary. This ensures that even when parents and guardians are no longer around, their loved ones will have resources to provide a better quality of life by supplementing what government benefits provide. .
If you are now or will be, financially responsible for a loved one living with a disability, creating a special needs trust is a thoughtful way to provide them with the best possible quality of life in the future. This does not replace, but rather, supplements the government benefits one is eligible for. Read on to learn more.
Most commonly, parents, guardians, or grandparents choose to set up a special needs trust fund for their child or relative. The essence of setting up a special needs trust is to supplement the assistance of the government and provide access to essential benefits and financial resources for your loved ones living with special needs.
Amongst other rules, Supplemental Security Income (SSI) benefit eligibility is suspended if the person has access to anything valued over $2000. In other words, not everyone qualifies for public assistance, especially for the Medicaid and Supplemental Security Income (SSI) programs.
If you do not have a will, a special needs trust, government benefits planning, and have not identified the budgetary needs and assets to fund them, you could be leaving your loved ones without the resources to provide the care and quality of life envisioned. This will be highlighted in detail later.
Rules change from time to time, so it is essential to updated knowledge, or work with a professional, regarding what applies and how to properly establish and update a special needs trust and make the most of the programs provided by the government.
A third-party special needs trust fund can be set up by anyone, typically parents, siblings or legal guardians of a disabled loved one. Anyone may contribute to the trust fund, except the beneficiary, regardless of whether they are related to the family or not. The parents or guardians leave assets to the special needs trust established for their child's benefit. A special needs trust can hold all types of property including cash, real estate, coins, art, etc. Assets are not lost when a beneficiary passes, they may go to siblings, other family members, or charities. You are in control and can make that decision.
In some cases, the individual may already have assets in their control. If so, they may create their own first-party special needs trust. If unsure about which special needs trust is right for your family, or how to go about setting up and funding a special needs trust fund, feel free to take advantage of the assistance we've provided at Serenitas Special Needs Planning. You can get answers to all your questions and get the help you need to get started today.
Special needs trusts can pay only for items as defined within the document. It is very important this is kept as broad as possible while complying with the rules of Social Security. When properly drafted and utilized, the special needs trust will allow eligibility for valuable government benefits and provide supplemental funds for the expenses of life that government benefits do not meet. Funds can be spent on nearly anything for the person's benefit.
If the special needs trust provisions are overly broad, it could cause Social Security to determine the trust “duplicates” the benefits provided and thus become ineligible for government benefits. On the other hand, if the provisions of the trust are overly restrictive, it can limit the ability of the trustee to provide funds for appropriate but unspecified expenses to maintain/enhance the beneficiary's lifestyle. The middle ground is to draft a special needs trust allowing broad discretion of expenses for the beneficiary, while ensuring the trust complies with government benefit eligibility requirements.
Generally, a special needs trust can be used to fund the following expenditures:
The assets from a special needs trust cannot be used to duplicate what is available through government assistance programs, but rather to supplement it.
A Letter of Intent, allows loving family members to specify the unique needs of their loved ones. They can provide insight to a current or future caregiver or successor trustee as to their thinking and wishes.
Excellent way to further clarify one's intention on how special needs trust assets should be spent and the type of lifestyle envisioned for their child living with a disability.
If you're still in doubt as to whether setting a special needs trust fund is appropriate for your loved one, here are some reasons you might want to consider establishing a special needs trust that addresses their unique needs:
The role of trustee is essential for administrating your assets for the benefit of your surviving family members. Whether in life or death, you want to be sure that the right person is in charge of managing and distributing your assets. Making the selection of your trustee(s) means that you can be confident your chosen representative will manage the special needs trust, as you envisioned.
You may name as many successor trustee's as you desire. The key is that they can be trusted to fulfill your instructions. If you do not have a trusted family member or friend, there are professional fiduciaries who can fulfill this role. We can help you work through your specific situation.
*The root word of “Trustee” is “TRUST”. You must trust this person!
This is, of course, the most important reason for establishing a special needs trust. In your absence, the trustee will be able to manage everything that you did when you were alive. They will be able to access the funds for care needed by your disabled loved one without any interruption. One of the overlooked benefits of planning is that you facilitate a smooth transition, security and quality of life for your loved one.
Failing to plan towards your child's future can significantly affect their standard of living when you're no longer there to attend to their needs.
Couples can set up a special needs trust to ensure that child support is maintained even when divorce occurs. So, whether your child qualifies for government aid or not, the trust fund can ensure regular child support payment. Direct child support payments will affect eligibility for government benefits. Assets in a special needs trust are not countable by SSI.
A special needs trust fund may also be required as part of a divorce agreement to ensure a disabled child is properly provided for. In either case, the special needs trust is not affected by divorce, and funds can be accessed for the care of your loved one.
When a person living with a disability, who otherwise qualifies for government benefits, is named in a will as a beneficiary of a family's assets, it can seriously jeopardize their eligibility to access government aid. Under the provisions of government programs like Supplemental Security Income (SSI) and Medicaid, if the possessions inherited by the person exceeds $2000 in value, they will become ineligible to benefit from such government assistance programs.
If the individual has already enjoyed benefits and care from these government programs, the inheritance may be subject to "payback" for past services rendered. For instance, if assistance was provided via Medicaid, the money paid for the previously provided healthcare or residential services can be recovered by Medicaid. However, there's a "grace period" to remove the funds; but if not done correctly, it could create more issues for the beneficiary.
Additionally, after “pay back”, if the individual's remaining assets still exceed $2,000, they will still be ineligible for SSI (Supplemental Security Income) and Medicaid. They may lose part or all of their inheritance and become ineligible for SSI cash benefits, and healthcare through Medicaid.
All of this can be avoided by being proactive. A special needs trust can receive a gift or inheritance on behalf of the beneficiary without it affecting eligibility for SSI and Medicaid.
The best time to prepare is now. Whether your child is 4 or 40 years old!
At Serenitas Special Needs Planning, our team has over 40 years of combined experience providing planning services exclusively to the special needs community. At Serenitas Special Needs Planning we educate families, allowing you to confidently navigate the challenges of planning for a child living with a disability. Comprehensive special needs planning is not just about creating a special needs trust, it addresses all issues that will affect the life of your loved one: Legal planning, Government benefits, Budget planning and Lifestyle planning. Our team of experienced advisors will help guide you in finding the options that work best for you. You can also be sure of getting help for issues related to SSI benefit application, setting up a disability trust fund, first-party special needs trust, conservatorship filing, and more.
With clients across the United States, we know it is important your professional understands how rules in differing states can affect your plan.
For more inquiries, you can check out our answers to the most prevalent questions on special needs trust. For a complimentary consultation to answer your specific questions, kindly email us today at Serenitas, and we'll be glad to help.