Special Needs Planning

What Is Special Needs Planning?

Few things weigh more heavily on a family than the duty to provide for the financial support of a loved one with special needs. Protecting them from a diminished level of care and ensuring that they enjoy life enriching experiences is always the highest priority for their family members. 

A Special Needs Trust (SNT) is a legal instrument drafted by an experienced elder law and special needs attorney that permits unlimited financial assets to be held by a designated trustee and used for the benefit of a person with special needs without jeopardizing their eligibility to receive public benefits like Medicaid and Supplemental Security Income (SSI).

Medicaid and Supplemental Security Income (SSI) Benefits

Supplemental Security Income (SSI) and Medicaid are both needs-based benefit programs providing financial support for disabled individuals. People with special needs qualify to receive these monthly SSI benefit payments and medical coverage only if their available financial resources do not exceed the level set by federal and state eligibility criteria. Should they own or control more assets or income than allowed under the program’s rules, their benefits would be suspended until they spend down their assets to a level meeting program eligibility.

The Special Needs Trust Solution

By establishing a Special Needs Trust (SNT), family and friends can transfer funds “for the exclusive benefit” of the person with special needs to a trust controlled by a trustee, not the beneficiary. The funds in the SNT are available to pay for any uninsured or uncovered expenses they incur, including the cost of providing life-enriching experiences for their physical, mental, and emotional well-being.

Trust assets could pay for medications, medical equipment, insurance premiums, personal care assistants, home renovations, private counseling, education, entertainment, travel, concert tickets, clothing, furniture, internet and telephone, and similar items and services.

Who Can Establish a Special Needs Trust?

Elder law and special needs attorneys can counsel you about the type of Special Needs Trust that best meets the needs of your loved one. 

As of 2016, federal law permits a disabled person to establish their own “Self-Funded Special Needs Trust.” The new law enables a person who was previously not disabled and owned financial assets to fund their own SNT with wealth they accumulated before acquiring disabling special needs. The law requires these trusts to be irrevocable and to name the Medicaid as the residual beneficiary upon the death of the disabled person for the benefits paid on their behalf during their life.

Other First-Party SNTs can be funded by a disabled person who receives a large inheritance or receives a large court judgment or personal injury settlement. 

A Third-Party SNT is one established by others with funds for the exclusive benefit of the disabled person. Third-Party SNT’s have the added benefit of not being required to name the government as a residual beneficiary. Instead, the unused funds may be distributed as the creator off the trust directs after the death of the original SNT beneficiary.

Elder law and special needs attorneys will explain other available strategies you and your family can explore to provide for your special needs loved one. Contact a Certified Elder Law Attorney (CELA) in your area for details.