20 Dec No Comments SSAdmin Elder Law, Legal , , , , ,

Question:
I have an adult daughter who has autism. While speaking with a friend, she said I should check with an attorney about setting up a special needs trust for my daughter so I could have peace of mind that she will be cared for when I die. Can you give me some information about a special needs trust, how it works and whether I should have a special needs trust for my daughter?

Answer:
Quite often, parents with adult children have already discovered that in order to receive governmental benefits for their child, the child must have very limited assets and income available to them. However, as you have probably found, governmental benefit programs just simply do not provide all that is needed.

Usually disabled persons can qualify for government benefits derived from Social Security Disability Income (SSDI), public housing or Medicaid. However, there are very strict rules for qualifying for these benefits. SSDI assists in the everyday living needs of a qualified person. Medicaid provides for the health care of persons who don’t have private insurance or cannot qualify for Medicare. Medicare is a government-run health care system program which is provided to persons with work related benefits. To be eligible for Medicaid, you must be either 65 or disabled. However, as stated, one must have very limited income and resources to qualify.

All trust structures, which includes a special needs trust, basically are a form of ownership of various assets where one person, the trustee, manages trust assets according to the terms of the trust document. A trustee must follow the provisions of the trust and only use the funds or assets according to the terms of the trust and, only for the benefit of the person or persons who are the recipients/beneficiaries of those assets, as has been determined by the trust terms. A “Special Needs or Supplemental Needs Trust” is a trust created for a physically or mentally disabled person, whether it is an adult or child, and for those who will need resource, other than governmental benefits, to care for them over their lifetime.

Many disabled individuals receive critical governmental benefits that they cannot afford to pay for in the private sector. Further, most special needs persons are not usually capable of managing their own financial affairs. This is where a special needs trust can assist in giving a parent peace of mind. Special needs trusts are primarily used to assist disabled persons, someone like your daughter and who are possibly receiving governmental benefits such as SSI or Medicaid. It is designed to benefit those persons with limited income, few resources, and receiving governmental benefits which do not or cannot supply all the “special or supplemental” needs of that disabled individual.

Generally special needs trusts fall into two categories, self settled trusts and third party trusts. Self settled trusts are trusts created by someone for themselves, using their individual assets, possibly from an insurance settlement following an accident which rendered them disabled. A Third party trust is usually a spouse of a disabled person, a parent for a disabled person, or some other third party (possibly a grandparent) which sets aside funds or resources for the benefit of another. With a special needs trust in place, a third party can provide funds for various needs or lifestyle betterment for the disabled individual, while preserving the individual’s access to governmental benefits and health care.

Therefore, if a third party or parent who wants to make sure that their loved one is provided for above and beyond the governmental benefits they receive, then a supplemental needs trust can be a good choice. Funds to set up a Supplemental Needs Trust can come from a variety of sources, such as an inheritance (funds passed on after death), a personal injury claim or from investments provided by a spouse, parent or other third party.

The benefits received by the special needs individual from a supplemental needs trust need not jeopardize their governmental benefits. A beneficiary of a properly drafted special needs trust never has a legal claim to the property (funds) in the trust. The funds are used for their various needs or to enhance their lifestyles that are not provided by the governmental programs. Such funds can be used for transportation, social activities, classes or just general overall purchases of daily items or activities.

by: Rebecca Proctor, Elder Law Attorney