Special Needs Trust – The Keystone of Disability Planning

Special Needs Trust

Who is Eligible for a Special Needs Trust?

Commonly, a Special Needs Trust is a trust established by parents or loved-ones who have children who are covered under a disability and are receiving state or federal government benefits. The trust is specifically tailored to permit the parents to furnish some economic benefits to their children without disqualifying them from public assistance. Less frequently, but also applicable, a special needs trust may be used to provide for elderly persons who are disabled, such as a parent. For elderly persons, however, transfers of funds or assets into the trust cannot be made once the beneficiary reaches the age of 65.

Purpose of a Trust For a Special Needs Person

A special needs trust, also known as a supplemental needs trust, is a trust intended to allow a disabled individual to maintain eligibility for certain needs-based government benefits.  Since government benefit programs are only intended to provide basic needs and critical items, i.e., food, shelter, clothing and medical care, a special needs trust provides supplemental items to improve the beneficiary’s quality of life.  The supplemental or non-necessary items a special needs trust may provide include, birthday and holiday gifts, electronics, such as a computer, laptop or television, educational expenses or a vacation.  Assets placed in a special needs trust are made available to provide for the disabled beneficiary’s special needs and to supplement, not supplant, public benefits.  The availability of these supplemental assets can greatly impact and improve the disabled beneficiary’s quality of life.Government benefits programs provide basic necessities for disabled persons, however, these programs, such as Medicaid and Supplemental Security Income (“SSI”), are means-base tests and enforce financial limitations on personal eligibility. For instance, a person can only qualify for SSI’s assistance program if they have resources of less than $2,000 in their own name.  Some assets are retainable that are not included in the $2,000 limit, such as, your car and life insurance policies with a face value of less than $1,500.  A special needs trust, therefore, enables a disabled person to have assets and funds in trust for his benefit, which do not count towards SSI’s $2,000 cap.

Requirements of a Trust for a Special Needs Person

A properly drafted special needs trust must satisfy specific requirements imposed by federal and state law in order to exclude the contents of the trust from the beneficiary’s personal income calculation. The most important requirement, recognized at both the federal and state level, is that the state must receive all amounts remaining in the trust upon the death of the trust beneficiary up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan.  Additionally, the trust must specifically state that the trust is for the sole benefit of the beneficiary, must be irrevocable, and must state with specificity, that the trust’s purpose is to permit the use of trust assets to supplement, not supplant, impair or diminish, any benefits or assistance of any Federal, State or other governmental entity for which the beneficiary may otherwise be eligible or which the beneficiary may be receiving.  These provisions are codified at the Federal level in 42 U.S.C. § 1396p(d)(4)(a) and at the State level in N.J.A.C. 10:71-4.11(g)(1). For more information regarding disability planning and special needs trusts, please feel free to contact an experienced trust attorney to help you and your family understand the benefits and details of a special needs trust or supplemental needs trust.  An experienced attorney can help guide and explain the options that will effectuate your goals and objectives for disability planning.

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