Because special needs trusts are becoming more common topics of discussion, I wanted to blog about them as well. More than half the United States population receives some sort of government benefits. In that group is the smaller group of individuals with special needs. The value in establishing a special needs trust for someone with special needs is protection over vulnerability. If you have a loved one with special needs, it’s important to understand exactly how to protect them by establishing a special needs trust.
Benefits Of Special Needs Trusts
Special Needs Trusts (SNTs) are commonly established for disabled people who will need assistance from the government in the form of Supplementary Security Income (SSI) and/or Medicaid. The primary goal of an SNT is to supplement benefits from the government as opposed to replacing them (more on this later). It’s worth noting that disability does not have an official or legal definition. At the same time, not every diagnosed disability will qualify someone for SSI and/or Medicaid. Therefore, if the option is in place to establish an SNT for your family member, we highly recommend protecting them and doing so.
For example, the Green family leaves an inheritance directly to their son Nathaniel through an ordinary trust. Nathaniel has special needs, he would receive the benefit of the trust and its assets. However, as a person with special needs, because of the funds available to him through the trust, Nathaniel may not be guaranteed disability benefits from the government that he may need to survive. Of course, we hope the trust would be significant enough in size. However, with inflation and the rising cost of living, both disability benefits and the original trust would better suit Nathaniel for the unforeseeable future. This is just one reason why special needs trusts are essential for your loved ones.
The History And Changes
Earlier, I mentioned that the goal of special needs trusts was to 1) protect your loved one with government benefits and 2) supplement the benefits from the government (i.e. Medicare, Medicaid—referred to as MassHealth in Massachusetts—and Social Security. Originally, they were strict about the relationship between the government and the family of the trust.
Over the past decade, special needs trusts have grown to include third-party trusts. Third-party special needs trusts are defined as trusts which have been funded by someone other than the beneficiary such as a family member (a third party). Interestingly, the terms of a special needs trust created by the beneficiary (or with funds payable to a beneficiary, such as an inheritance or the proceeds from a lawsuit) dictate that upon the beneficiary’s death, the funds remaining in the trust be repaid to the state’s Medicaid agency. This is only the case if the funds belong to the direct beneficiary. If the funds come from any other party, generally there is no clause regarding paying back to the state’s agency.
As part of the circle of life, if you and your spouse establish a special needs trust for your child with special needs, certain events will transpire naturally. To put it simply, you will most likely pass on before your child, leaving him or her without a trustee. Be safe in your preparations. Establish a successor trustee to take over management of the trust in the event you and/or your spouse passes. Some trusts have more than one successor trustee in line, depending on the situation of the client and their family. I absolutely advise being smart and safe over sorry.
For questions regarding any of the topics discussed in this blog, please contact me directly at [email protected].
Thank you for reading,