Needs based government programs, Supplemental Security Income (SSI) and Medicaid, are important programs for people with disabilities. Because of their needs based requirements, recipients of these benefits cannot have more than $2,000 in assets. If such a person were to receive more than $2,000, he or she could lose SSI and Medicaid.
These programs, however, provide only for the bare necessities: food, clothing and shelter, and then on a very modest basis.
If you have a family member that you would be leaving a portion of your estate to upon your death, you need to investigate the manner in which you can leave money to the individual without jeopardizing his or her benefits. If you were to leave a gift of as little as $10,000, he or she could lose these important benefits and actually be worse off after the gift. Not the intended consequence.
The Special Needs Trust or Supplemental Needs Trust is a vehicle which allows the individual to maintain his or her government eligibility while making assets available for other needs of the person.
First, the money in such a trust can never be given directly to the individual. It is instead distributed on his or her behalf for good or services that benefit him or her.
Common uses of assets in a Special Needs Trust can include transportation (automobile, insurance, repairs), appliances (TV, VCR, stereo, microwave, stove, refrigerator, washer/dryer), computers (hardware, software, programs, internet service) funeral expenses, furniture, home furnishings, pet and pet’s supplies, telephone or cell phone service and equipment, vacations.
How should such a trust be set up? It can be a part of a parent or grandparent’s estate plan if the parent is providing for the disabled child. It is important that the attorney drafting the estate plan is familiar with such trusts and the requirements.
If the individual is setting up the trust due to money he or she may already have received, a “self-settled” trust, then the trust must be unchangeable, only for the benefit of the disabled individual, and any assets left at the death of the disabled individual must be payable to the government for repayment of government benefits.
A Special Needs Trust is an important tool for improving the life of a disable individual by continuing to provide those extras that he or she received while his or her parents or grandparents were alive.