What Is A Special Needs Trust and Why Is It Important?
A Special Needs Trust provides financial and other assistance to someone without causing them to lose government benefits. Government benefits that a Special Needs Trust helps protect includes Medicaid, SSI (social security income), and low-income housing benefits, just to name a few. Also, a Special Needs Trust allows us to protect assets from nursing home costs when someone goes to a nursing home.
Strict guidelines must be met in order to receive many government benefits. These guidelines include limits on the amount of income and assets the individual may have. Unfortunately, government benefits may not be sufficient to cover all of an individual’s needs. So, family members – usually parents, grandparents and siblings – step in to help. But their help could lead to unintended consequences, such as a loss of SSI and Medicaid.
The loss of SSI and Medicaid is devastating. For many people with special needs, SSI is the sole source of income, and Medicaid is their only way to get much-needed healthcare and medications. And someone who receives government benefits has already experienced a challenging journey. Qualifying for benefits is difficult and stressful. No one wants to go through this long, difficult process again. Fortunately, a properly drafted Special Needs Trust avoids the risk of losing the benefits.
How Do You Create A Special Needs Trust?
Usually a parent or grandparent establishes a Special Needs Trust for a family member who has special needs. The trust helps and supports the family member without affecting their government benefits, including SSI and Medicaid.
The trust should be written by an attorney experienced with Special Needs Trusts and the government benefits involved. By carefully drafting the trust, the assets in the trust will not affect the government benefits, and distributions from the trust will provide an extra benefit. Although some people have expressed concern that the benefits available from a Special Needs Trust are limited, they are not. In fact, the benefits can be substantial and improve an individual’s quality of life.
This illustration will help. If someone has a child with special needs, such as autism, ADHD, Down syndrome, or some other challenge, a parent or grandparent can establish a Special Needs Trust. After it is established, anyone can contribute assets, such as money, bank accounts, property, real estate, and cash. The assets in the trust will be used to support the individual with special needs. After the individual dies, the assets remaining in the trust can be distributed to someone else, such as siblings, nieces or nephews, or even a charitable organization whose mission is to support those with a similar special need.
The government benefits will be lost if a Special Needs Trust is not used and the property is given directly to the individual receiving government benefits. We do not want that result. Obviously, giving assets directly to them is a bad idea. Instead, the assets should be placed in a Special Needs Trust. Structured this way, the individual receiving government benefits will not lose those benefits, yet they will receive support from the trust. And at the individual’s death, the assets in the trust will pass to whomever or whatever the person creating the trust thought best, including family members or people with a similar special need.
When Should You Create a Special Needs Trust?
You should create a Special Needs Trust as soon as you discover that you have a special needs family member who you want to help now or sometime in the future. Compared to waiting until years later, creating a Special Needs Trust soon will provide you with more flexibility and a greater opportunity to get the most benefit out of the trust. But, even if you have delayed in creating it, the benefits to having a Special Needs Trust far outweigh any drawbacks. Call us or schedule an appointment to see how a Special Needs Trust might fit in your life.