A special needs trust is a unique instrument designed to protect the assets of a loved one who receives benefits due to a mental or physical disability, or payments arising from an injury which need to be specially distributed.  Many government benefits such as Medicaid, Supplemental Security Income, Social Security Disability Income, and many others require an individual to meet certain criteria before they are eligible to receive those governmental benefits.  These programs generally require an individual to have few assets (typically under $2,000), and a low monthly income).  If an individual has qualified for government benefits and then receives a large inheritance that prohibits them from meeting the program’s criteria, many of the government programs would stop providing assistance and require an individual to use their inheritance.

A special needs trust is designed to hold the assets of a disabled person and distribute funds in a manner that allows that individual to still qualify for public benefits while providing for additional support.  It must be an irrevocable trust.  In other words, once it is created, the terms cannot be modified or amended.  The goal of a special needs trust is to ensure that the trust assets are not countable resources of the disabled person when determining the eligibility for governmental programs.   In order to maintain eligibility for government funds, the beneficiary of a special needs trust cannot be the trustee, they cannot  control the assets of the trust, they cannot have the right to demand that the trustee the distribute property or income from the trust, or change the terms of the trust.  Under a properly drafted Special needs trust do not have the legal ownership of the assets in the trust and cannot demand that the assets be distributed.  If drafted properly, a special needs trust allows a disabled beneficiary to continue to receive government assistance for their basic living expenses and medical treatment, while enjoying the additional support of the assets in the trust.

A special needs trust can either be a first party trust, that is a trust funded by the beneficiaries own assets and property, or a third-party trust, which is a trust  that is established or funded by someone other than the beneficiary (such as a parent of grandparent).  If you create a first party trust for your own benefit, it is important to note that those funds that remain in the trust after the lifetime of the beneficiary must be used to payback and reimburse the state.  Without this provision in the trust, the trust may fail and not offer  the security desired.

If you are a caretaker for an individual with a physical or mental disability, a special needs trust may be a tool available for you to use in your estate plan. We are highly skilled in special needs planning and the instruments necessary to protect a loved one with special needs.