Guest Blog by Sam Butcher, Butcher Elder Law
From service coordination with your SSA to carefully researching providers, you’ve worked tirelessly to be the best advocate and guardian for your family member with a developmental or intellectual disability.
But have you considered the value that a Special Needs Trust can offer?
A Special Needs Trust (SNT) is a trust established for the benefit of an individual who receives government benefits based on need. SNTs, also referred to a Supplemental Needs Trusts, are intended to supplement needs-based government benefits, such as Supplemental Security Income (SSI) and Medicaid.
You should be concerned that if your loved one receives a distribution of assets, such as a monetary gift, an inheritance, or settlement, their SSI and Medicaid benefits could be jeopardized.
With an SNT in place, your family member is protected from having needed and deserved benefits taken away should they receive unanticipated gifts or other outright distribution of assets.
In addition, SNTs allow a beneficiary to use gifted money to enhance their quality of life and pay for a wide range of additional assistance and “extras” that government benefits do not cover.
For example, a Special Needs Trust could afford the ability to purchase a home, specialized wheelchairs, handicap-accessible vans or mechanical beds. It can pay for personal attendant care while on vacation, as well as other recreational and cultural experiences.
When establishing a SNT, it’s essential to determine the correct trust.
While there are four types of Special Needs Trusts, the two most commonly categories are First-Party SNTs and Third-Party SNTs.
A First-Party Special Needs Trust:
- Can be established by the individual with the disability (or by the court or other surrogate acting on the individual’s behalf) using the individual’s own funds.
- Must be established for the benefit of one individual who is disabled and under the age of 65 at the time the trust is funded.
- Can only be established by the parent, grandparent, or guardian of the person with the disability or by the court.
- Must be created while the grantor is living and must be irrevocable.
- Must give sole and absolute discretion over the use of the trust income and property to the trustee
- Requires a payback provision pursuant to the Medicaid plan of the beneficiary’s state.
A Third Party Special Needs Trust:
- Is established by one person using his or her own funds and for the benefit of another person with a disability.
- Is funded exclusively with assets not belonging to the beneficiary with the disability.
- Requires careful drafting to ensure the beneficiary doesn’t use the income for food or shelter, which would directly impact government benefits.
- Can be created without a payback provision, which allows funds to be distributed upon the beneficiary’s death to designated family members.
Special Needs Trusts are an extension of the care you offer as a parent or guardian to guarantee the stability of benefits for years to come.
Taking the steps to draft a SNT with a specialized Special Needs Trust lawyer might seem overwhelming, but doing so can offer tremendous relief knowing your loved one is taken care of in all situations.
The information in this article is true and complete to the best of our knowledge. All recommendations are made without endorsement or guarantee on the part of Koinonia Homes, Inc. We disclaim any liability in connection with the use of this information.
Sam Butcher is principal of Butcher Elder Law and a published author, speaker and thought leader on the specialty areas of elder law including estate planning, asset protection, special needs, Medicaid, Veterans benefits, business succession planning and probate and trust administration. For more information visit butcherelderlaw.com.