If you are a parent of a child with special needs, you need special estate planning.
If you leave assets directly to your special needs child, either in a will or through intestacy (dying without a Will), the inheritance your child receives will jeopardize his or her ability to receive benefits under government programs such as Supplemental Security Income and Medicaid.
Below are answers to frequently asked questions about special needs trusts.
WHAT IS A SPECIAL NEEDS TRUST?
A Special Needs Trust (SNT), also known as a Supplemental Needs Trust, is a discretionary trust created to hold the property of a disabled beneficiary and distribute funds to that individual while preserving the beneficiary’s right to receive government benefits like Medicaid or SSI.
WHAT IS THE BENEFIT OF A SPECIAL NEEDS TRUST?
Supplemental Security Income (SSI), Social Security Disability Insurance (SSD), Medicare and Medicaid are government programs that offer support to disabled individuals.
SSI is a needs-based program that is only available to people who meet certain income and resource limitations.
In most states including Texas, people receiving SSI are automatically entitled to Medicaid.
To qualify for SSI and Medicaid, a single person must own less than $2,000 of countable assets.
Those with countable assets greater than $2,000 can lose their eligibility for benefits.
A properly drafted and executed Special Needs Trust will shelter those assets for the special needs beneficiary while allowing the beneficiary to benefit from government programs.
WON’T ANY TRUST WORK?
Not all trusts will work to preserve a disabled beneficiary’s benefits.
Support trusts (most common trusts are support trusts), which direct that funds be used for the health, welfare, and support of a beneficiary, will usually disqualify a disabled beneficiary because the assets in a support trust are counted as the beneficiary’s resource.
A Supplemental Needs Trust is a discretionary trust that allows a trustee to use trust funds to supplement, not replace, a beneficiary’s government entitlements.
To maintain eligibility for needs-based support, the beneficiary cannot have control over the assets in the SNT.
The beneficiary cannot manage the assets, have the right to demand distributions of income or property from the SNT, name the Trustee or change the terms of the SNT.
The use of the SNT’s assets for the benefit of the beneficiary is determined at the discretion of the Trustee.
Beneficiaries of properly drafted special needs trusts do not have legal claim to the property in the trust.
That means that the trust assets are not countable resources and do not affect the beneficiaries’ eligibility for benefits.
As a result, the beneficiaries are able to continue receiving government benefits, while still enjoying the benefits of the property in the trust for supplemental needs.
WHO CAN SERVE AS TRUSTEE OF A SPECIAL NEEDS TRUST?
The Trustee can be a family member, friend, or private professional Trustee.
In the case of a self-settled special needs trust, the person making the gift can also serve as trustee. A self-settled special needs Trust requires a payback provision for any governmental benefits received. All other special needs trusts do not require such payback provisions.
A special needs trust can help you provide for your child without jeopardizing his or her eligibility for benefits under SSI and Medicaid.
If you are a parent of a child with special needs, a special needs trust should be an essential part of your estate planning.
Call our attorneys today at 817.638.9016 or RWeaver@weaverlegal.net