Special Needs Trusts

Why Special Needs Trusts?

A Special Needs Trust is a legal document designed to benefit a beneficiary with a disability.  A Special Needs Trust can form part of a Last Will and Testament, but more often it is a document that stands alone.  Congress mandates that a Special Needs Trust must be irrevocable to comply with applicable laws.

When properly drafted, a Special Needs Trust may enable a person under a physical or mental disability, or an individual with a chronic or acquired illness, to hold, in Trust, an unlimited amount of assets, without those assets being considered countable assets for purposes of qualification for governmental benefits that are based upon need.

Governmental benefits based upon need may include such benefits a Supplemental Security Income (SSI), Medicaid, the expenses of vocational rehabilitation, subsidized housing, and other benefits that are based upon need.

For purposes of a Special Needs Trust, an individual may be deemed impoverished if his or her assets are less than $2,000.00.  The Special Needs Trust provides for supplemental and extra care over and above that which the government may provide, for personas under mental or physical disabilities, chronic or acquired illnesses.

Special Needs Trusts have been used for several years based upon case law.  However, in 1993, Congress created an exception under the amendments to the Omnibus Budget and Reconciliation Act (OBRA-93) specifically authorizing the use of a Special Needs Trust to benefit individuals who otherwise would qualify by virtue of a disability for Social Security Benefits.  In fact, the Social Security Operations Manual also authorizes the use of a Special needs trust to hold non-countable assets.

The Special Needs Trust is it’s own “entity” and exist under a Federal I.D. Number (Employer Identification Number ) issued by the Internal Revenue Service, and is not linked to either the Grantor’s or the Beneficiary’s Social Security Numbers.

When is the time to create a Special Needs Trust?

It is very common for parents to create the Special Needs Trust as a means for holding assets to benefit disable children after the parent’s death.  The Special Needs Trust is an estate planning tool of choice for those parents.  Additionally, the disabled or chronically ill individual may nat some time during his or her lifetime come into funds from third party sources which could include personal injury settlements, bequests from relatives or friends, Social security or other types of insurance back payments.

Leaving money to others can create serious problems.

“Disinheritance” was commonly used before the use of Special Needs Trusts.  Parents would often disinherit a disabled individual to preserve his or her status and eligibility for governmental benefits.  A non-disabled sibling would hold the assets for the benefit of the disabled sibling.  This can have risky consequences as the money becomes subject to judgment or creditors of the non-disabled sibling.

Using a Special Needs Trust assures that the funds are not at risk and go for the purpose intended; the needs of the disabled individual.

What needs are met by the use of this trust?

While the disabled individual’s daily needs of food, clothing, shelter and medical care are ordinarily met by state and federal programs, the Special Needs Trust provides for “supplemental” and “extra care” over and above that which the government provides.

Will pay-backs be required?

Pay backs to Medicaid are currently required only under specific circumstances.  A Special Needs trust that is funded by parents or other third party sources will not be required to pay back Medicaid.  The only assets within the trust that are subject to the repayment obligation are those assets which belonged to the disabled individual him or herself which were subsequently transferred into the trust.   An example of assets which would belong to the disabled individual in the first place could be such assets as earnings from a job, Social Security back payments, personal injury recoveries, and the like.  The disabled individual’s estate then might be liable for an amount equal to the Medicaid used during the life time of the disabled or chronically ill individual.

  • RSS Feed
  • Google+
  • Facebook
  • Twitter


Linda E Wasielewski
attorney & mediator
3199 Logan Valley Road
Traverse City, MI 49684
Phone: (231) 933-0829
Email: linda@lindalawtc.com


Linda has provided me with expert legal assistance from estate planning to personal counseling. I highly recommend her!
I have used Linda as an attorney personally and professionally. I have been able to trust Linda with the many families that I have had the opportunity to work with over the past 5 years. I trust that she will be sensative, helpful and generous [...]
Linda provided wills for my husband and me. They include Health information,living will and power of attorney and executor for each of us. She did a great job and we are happy to reccomend her. She has much knowledge in this (Estate)and other [...]
Linda is an intelligent, knowledgeable and compassionate woman. She is an excellent attorney who works diligently for her clients. In the courtroom the judges and other attorneys respect her. Linda is active in the community and enjoys working [...]
Linda is a wealth of knowledge and expertise when it comes to Estate Planning and Probate matters. She is quick, efficient and thorough. Linda is an especially skilled professional because she can talk about legal matters without making her [...]
Linda was quick to respond to our questions, and followed through on a timely basis. We would highly recommend Linda's services.
Linda is knowledgable, organized and professional. She can be counted on to be dependable and get the work done. She has the right mix of professionalism mixed with a good sense of humore and balance.
Linda puts her clients' best interests first and foremost. Her knowledge of estate planning law is extensive and Linda promotes basic planning tips. I would recommend Linda for any of your legal needs.
Linda is a pleasure to work with, she is knowledgeable and helpful.
Linda is a very professional and thoughtful attorney in Traverse City, Michigan. She is well respected in our community and I would refer any of my customers to her for their legal needs.
Linda's standards and ethics are the driving force behind her work! She is easy to work with and very accountable with regard to personal and secure matters. Her abilities are far reaching and because of that I will always choose not only work [...]
It is with great pleasure that I recommend Linda Wasielewski. I have known her for three years. Linda has always displayed a high degree of integrity, responsibility, and ambition. She is definitely a leader rather than a follower. She is [...]
Linda is a part of our UBS Financial Services Attorney Network. I recommended her to one of my UBS clients who lives in Michigan. She did a great job for my clients and we are all very pleased.
Linda is a true professional and gives very forward thinking and consultative advice. She was instrumental in assisting us in setting up a limited liability corporation. She is an expert in many areas of the law, from business incorporations to [...]