A special needs trust is a great tool to support a loved one with special needs, because if someone leaves money directly to the person it may keep the person with special needs from qualifying for government benefits.
A Special Needs Trust is important because otherwise a beneficiary would most likely burn through his or her inheritance to pay for medical help. A beneficiary who receives a large inheritance will no longer receive government benefits like Medicaid because they will technically have too much money to qualify. A Special Needs Trust allows this money not be wasted because it is created with the specific intent of supplementing government assistance to help support someone with special needs. The money is thus used in a way that does not disqualify the beneficiary from receiving government assistance.
An attorney with experience in this area should draft a Special Needs Trust. The main purpose of the trust is to support the disabled beneficiary by paying for health care related expenses that government assistance does not help with. While there are many basic special needs trust forms, each special needs trust should be tailored to each disabled person’s specific needs.
In the trust document the settlor, or trust maker, will transfer property in the name of the trust and allow a trustee, or manager of the trust, to manage the assets for the special needs person. Usually the settlor and trustee are the same person until the settlor can no longer serve as trustee, and then a successor trustee will be named. Each person who serves as trustee is legally required to follow the terms of the trust document to the use the property for the benefit of the disabled beneficiary.
Anyone can contribute to the assets to a Special Needs Trust. Usually trusts are created by parents for their children, but anyone (friend or family) can contribute to the trust. There is also no limit to the number of trusts that may be created for the disabled person.
Once the trust is funded, the trustee must then begin administering the trust for the benefit of the beneficiary. For a Special Needs Trust, the trustee main job is to support the beneficiary without jeopardizing his or her government benefits. The trustee should have a good understanding of how distributions will affect the government assistance. The trustee also has additional duties such as paying taxes, keeping records, and investing trust assets.
The primary purpose of the trust is to support the person with special needs. Generally, trust funds can be used for caregiving and therapies not paid for by Medicaid, travel expenses for health care, food, shelter, and other things related to the beneficiary’s support. Payments for food and shelter are more complicated as they might trigger a reduction in SSI benefits, so we recommend consulting with an attorney before making these distributions. Typically a Special Needs Trust will not allow the trustee to make large distributions of money, as this can make the beneficiary ineligible for government benefits. For more information on how to create a Special Needs Trust contact the Law Office of David Goldman PLLC today.