Ensuring Financial Security for Individuals with Disabilities: The Role of Special Needs Trusts

Using a Special Needs Trust can provide crucial financial security and support for your loved ones with disabilities while helping to preserve their government benefits. Government benefits often fall short of providing the funds for those receiving them to live a comfortable life beyond just meeting their basic needs. In some cases, government benefits are not even sufficient to cover minimum living expenses. However, additional non-government resources can reduce or disqualify the recipient from receiving their benefits. A properly established and maintained special needs trust can financially supplement a disabled person’s living without disqualifying them from their government benefits.

Types of Special Needs Trusts

Two of the primary types of special needs trusts include:

1. First-Party Special Needs Trust: This trust must be funded by the person with special
needs, and any remaining funds must be used to repay Medicaid upon the beneficiary’s
death.

2. Third-Party Special Needs Trust: Third-party special needs trusts are funded by
someone other than the person with special needs, typically a family member. This type
of trust is not subject to Medicaid payback rules, so the assets of the trust can be
distributed to others after the beneficiary’s death.

Benefits

Special Needs Trusts do not disqualify a person with special needs from receiving her or his
government benefits. This allows him or her to receive funds to provide for additional needs without disqualifying the beneficiary from receiving SSI and Medicaid. The funds can be used for items not covered by government benefits such as education, transportation, personal care, and recreational activities.

Establishing a Trust

To set up a Special Needs Trust, consult an attorney specializing in estate planning. Choose a reliable trustee, who could be a family member, professional trustee, or financial institution. The trust document should clearly outline the purpose of the trust, the beneficiary’s needs, and how the funds should be used. Regularly review and update the trust to ensure it continues to meet the beneficiary’s needs and complies with current laws.

Considerations

Careful planning and setting up a Special Needs Trust ensures that loved ones with special needs are financially supported and maintain their quality of life without risking their eligibility for essential government benefits.