SpeCiaL NeedS truStS preServe iNCome For tHe diSaBLed
Real Property Probate & Trust Section Chairs : Kristin Morris – Shutts & Bowen & Anthony Diecidue – Genders Alvarez Diecidue
Aspecial needs trust , sometimes known as a supplemental needs trust , is a specifically designed trust that allows the disabled beneficiary to benefit from the use of trust property while remaining eligible for needs-based government assistance programs , such as Medicaid . This kind of trust is created so that the beneficiary may supplement their usual income with government benefits when they ’ re unable to pay their living expenses by their own means .
In a special needs trust , distributions of income or principal must be made to preserve the beneficiary ’ s eligibility for needsbased programs . For example , trust distributions can be used to directly pay providers of medical services but should never be made directly to the beneficiary . It is crucial that trust assets aren ’ t used to pay for certain expenses , because the trust may be disqualified and the trust property can be counted against the beneficiary for purposes of qualifying for needs-based programs .
The four most common types of disability benefits are Supplemental Security Income (“ SSI ”), Social Security Disability Insurance (“ SSDI ”), Medicaid , and Medicare . SSI and Medicaid are needs-based programs , while SSDI and
Medicare are not . Thus , it ’ s generally not necessary to use a Florida special needs trust to preserve SSDI or Medicare benefits .
Unfortunately for those who benefit from needs-based programs , it ’ s easy to be
© Can Stock Photo / sqback disqualified from these programs . Something as simple as receiving a lump sum of money or assets , such as from an inheritance or court settlement , can disqualify a recipient . A special needs trust can be monumental in preserving the assets of a disabled beneficiary who receives needsbased government benefits and may be in jeopardy of losing those benefits because of a disqualifying event .
Creating a special needs trust is not much more complicated than creating other types of trusts . But it can be difficult to maintain . Now , thanks to the Special Needs Trust Fairness Act , the disabled person , provided they are mentally capable , can establish and fund their own special needs trust . Before , the special needs trust had to be created by the court or the parents , grandparents , or legal guardians of the disabled beneficiary .
The trust language must follow the laws governing Florida special
a special needs trust can be monumental in preserving the assets of a beneficiary who receives needs-based government benefits .
needs trusts and should direct how trust assets be spent . Specifically , the trust should be designed as a special needs trust under 42 U . S . C . § 1396p ( d )( 4 ); the trust should state that the settlor ’ s intent is to allow eligibility for needs-based government assistance programs , including SSI or Medicaid , for a disabled person by supplementing those government benefits ; that trust distributions may be made in the trustee ’ s sole discretion for maintaining the quality of the beneficiary ’ s health , education , safety , and welfare when not provided by government assistance ; and that the trustee will repay all state Medicaid bills upon termination of the trust after payment of estate expenses .
Special needs trusts can be incredibly important and exceptionally complex . Consult with an experienced estate planning attorney before drafting such a trust .
Author : David Fall – Older , Lundy & Alvarez
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