A special needs trust is a legal arrangement designed to protect and manage the assets of an individual with a disability while preserving the individual’s eligibility for government benefits. These trusts are established to supplement the care and assistance provided by public benefit programs such as Medicaid and Supplemental Security Income (SSI), without jeopardizing the beneficiary’s eligibility.
If you have questions about how to form a legally robust special needs trust, contact one of the knowledgeable elder & special needs law attorneys at Patrick, Harper & Dixon in Hickory, NC. Our friendly staff will gladly arrange a legal consultation to discuss the facts of your situation.
Understanding Special Needs Trusts
The main purpose of a special needs trust is to ensure that the trust beneficiary’s eligibility for public benefits is not jeopardized, as receiving additional income or assets above the eligibility limits for Medicaid or Supplemental Security Income (SSI) will cause a loss of benefits. By placing assets in a trust, they are not considered the beneficiary’s own resources and thus do not impact their qualification for critical programs.
Special needs trusts can also enhance the quality of life for individuals with disabilities by providing funds for various needs and desires beyond what government programs cover. These may include medical expenses not covered by insurance, educational pursuits, therapy, recreational activities, and more.
Lastly, special needs trusts protect assets and ensure wise management of those assets. By establishing this, families can protect their assets from being depleted for the beneficiary’s care. Additionally, the trust appoints a trustee who can manage the funds responsibly, ensuring they are used to meet the beneficiary’s unique needs effectively.
There are two primary types of special needs trusts, which differ based on whose assets are used to fund the trust. The two types are first-party and third-party trusts.
First-Party Special Needs Trusts
A first-party special needs trust, also called a self-settled special needs trust, is funded using the beneficiary’s own assets and funds. These funds may include money from a personal injury settlement or inheritance. These trusts can also be established using funds from court settlements or judgments.
One of the key features of this type of special needs trust is that the beneficiary does not have direct control over the funds. Instead, the named trustee has the discretion to distribute the funds according to the needs of the beneficiary. Therefore, the trustee needs to carefully manage the funds, and must ensure that trust assets are used in ways that are consistent with relevant rules, statutes, and regulations.
Third-Party Special Needs Trusts
Unlike a first-party trust, a third-party special needs trust is established using assets from someone other than the trust beneficiary, typically a family member or loved one. It allows the family to leave an inheritance or make gifts to the trust, which can be used to supplement the beneficiary’s care without affecting their eligibility for public benefits, making this type of legal tool very useful in estate planning.
Common types of assets used to fund third-party special needs trusts include cash, bonds, stocks, and real estate, although other types of property may be used as well.
As with a first-party special needs trust, the beneficiary does not have direct control over the assets. A trustee is designated to manage the funds, and must ensure the trust is managed consistent with applicable rules and regulations to maintain the beneficiary’s government benefits.
It is critical to speak with a knowledgeable estate planning attorney to determine which type of special needs trust is best for you.
ABLE Accounts
Although not a trust, it’s worth mentioning ABLE (Achieving a Better Life Experience) accounts. These accounts allow individuals with disabilities to save and invest funds without impacting their eligibility for public benefits. ABLE accounts have specific limits and guidelines but can serve as a valuable financial tool for individuals with disabilities.
Contact a Skilled Attorney to Establish a Special Needs Trust
By preserving eligibility for government benefits, supplementing care, and protecting assets, special needs trusts offer peace of mind and a sense of security for families facing the challenges of planning for the future of their loved ones with disabilities.
Establishing special needs trusts requires a deep understanding of legal requirements, government benefit programs, and the unique circumstances of the beneficiary. An attorney experienced in special needs planning will ensure that the trust is tailored to the unique needs of the beneficiary, providing a solid foundation for their lifelong care and support.
If you need assistance establishing a special needs trust, turn to the knowledgeable professionals at Patrick, Harper & Dixon in Hickory, NC. Please contact us to schedule a consultation.
