What is a Special Needs Trust?

August 8th, 2014 by David McCurry

There are many different techniques and strategies available to plan for individuals with a disability.  The vast majority of the time this planning involves the creation of a Special Needs Trust as part of the plan.

What is a Special Needs Trust?  Like any trust, a Special Needs Trust is a contract and you can draft whatever rules and provisions into the trust that you want.  What type of disability are we dealing with?  Where will the individual live?  Who can or should be the Trustee of the Trust?  What are the goals you want to achieve in planning for the individual with a disability?  These are just a few of the questions that will change the planning strategies contained within the provisions of the Special Needs Trust from client to client.  It’s not a one size fits all document.

What is the benefit of creating a Special Needs Trust?  The short answer is a Special Needs Trust can greatly enhance the quality of life of the individual with a disability by allowing him or her to benefit from the assets in the trust while maintaining his or her Medicaid and SSI benefits.  The Special Needs Trust can pay for travel expenses, hobbies, entertainment (T.Vs, computers) additional medical equipment or services not covered by Medicaid, among other things.

So why do you need a Special Needs Trust to maintain Medicaid and SSI benefits?  In order to qualify for Medicaid and SSI benefits an individual must have resources of less than $2,000 (this includes bank accounts, cash, stocks, bonds etc.).  A Special Needs Trust is not considered to be a resource of the beneficiary for Medicaid and SSI eligibility purposes.  Therefore, if assets are intended to benefit an individual with a disability, giving those assets outright to the individual is poor planning because of the high probability it results in a loss of Medicaid and SSI benefits.  The better plan is to leave the assets to a Special Needs Trust which would allow the individual, as beneficiary of the Special Needs Trust, to benefit from the assets in the Special Needs Trust and maintain his or her Medicaid and SSI benefits.

The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. The law changes frequently and varies from jurisdiction to jurisdiction. Being general in nature, the information and materials provided may not apply to any specific factual and/or legal set of circumstances. No attorney-client relationship is formed nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney. If you require legal advice, please consult with a competent attorney in your area.