SPECIAL NEEDS PLANNING

Family members of a person receiving benefits from a disability-based government program (or who might be eligible for such benefits in the future) must pay careful attention to their estate planning. The best option to provide financially for a person with special needs is often a Special Needs Trust.

What is a Special Needs Trust?

A Trust is a legal entity that holds assets for someone’s benefit. The creator of the Trust puts property into the Trust and names a Trustee to manage the property and distribute it to the beneficiary according to the provisions in the Trust. A Special Needs Trust places limitations on the types of distributions that the trustee can make, so that trust distributions will not disqualify the beneficiary from eligibility for government programs.

Special Needs Trust Distributions

To protect the assets in a Special Needs Trust from being counted as a resource in determining the beneficiary’s eligibility for needs based programs, a Special Needs Trust directs the Trustee not to pay for services provided for by a government agency. The Trust authorizes distributions only for the beneficiary’s special or supplemental needs. Examples of distributions that might be made for a beneficiary’s special needs include specialized therapies, dental care, exercise equipment, computers, cable tv, cultural events, athletic contests, movies, and the services of a care manager. Improper distributions from a Special Needs Trust can cause the loss of public benefits. For example, if a beneficiary receives SSI and Medicaid, cash distributions from the Special Needs Trust to the beneficiary will reduce the Beneficiary’s SSI. If the cash distributions exceed the monthly SSI payment, the beneficiary will lose SSI. If Medicaid qualification was based on receiving SSI, the beneficiary will also lose Medicaid.

Who Should be Trustee of a Special Needs Trust?

Because of the importance of making proper distributions, the Trustee should be someone who either already knows or is willing and able to learn the requirements of the government programs that provide benefits to the beneficiary. The Trustee could be a family member or a financial institution. Often people will name a family member and a financial institution as co-Trustees, because the family member knows the beneficiary and understands his or her special needs, while the financial institution has the expertise to manage the assets and follow the distribution rules.