Joseph A. Bellinghieri, Esquire
If you have a loved one who is disabled, establishing a Special Needs Trust can supplement government assistance and ensure long-term care.
A disabled child, spouse, or parent often has unique and long-term needs that are not provided for by Medicaid and other government benefit programs. To meet these needs, it may be wise to consider establishing a Special Needs (or Supplemental Needs) Trust. A Special Needs Trust can be used to set aside funds for many purposes, including medical care, therapy, education, training, companionship, and other benefits that public assistance might not fund.
Who Can be Helped by a Special Needs Trust?
Parents of disabled children are most likely to establish
a Special Needs Trust. However, individuals planning for an institutionalized
spouse or surviving parents can also establish such a trust. In addition,
a disabled person can use a Special Needs Trust to manage and shelter
assets that are available as a result of a personal injury award, inheritance,
or life insurance. (Keep in mind that certain types of disabilities and
injuries make your loved one more prone to future health problems, making
the needs even greater.)
Setting up the Trust Document
When the trust document is drafted, you have the authority to determine
the following aspects:
However, the wording of the trust document is critical, as is the assignment
of authority. The beneficiary can have no power over the trust or its assets.
And, the trust must be specifically created to be supplemental, providing
only extras to the beneficiary that other benefits do not cover. The trust
document should not provide for the health, welfare, and support of the
beneficiary. If any of these words appear in the trust, then the Social
Security Administration will view the trust as primary, and will insist
these monies be spent first before providing the beneficiary with any Social
Security benefits.
Trust Management
All trust assets are managed and disbursed according
to the guidelines you specify in your trust document. Once the trust is
established, all assets are under the control of the person or organization
designated as Trustee. The Trustee is also bound to act in accordance with
the terms of the trust document. The disabled beneficiary has no legal right
to demand funds from the trust once it is established.
The Trustee will be required by the trust document to apply for any available benefits and should have no discretion to make any distributions that make the beneficiary ineligible for benefits. All decision-making regarding the determination of what special needs to fund and the amount and frequency of distribution must be vested exclusively in the Trustee.
The use of a Special Needs Trust should help to assure that public assistance is not denied, terminated, or reduced, as a result of the existence of the Trust. However, the Trustee still must ensure the money is properly spent. The Trustee should keep the trust money out of the hands of the beneficiary by making payments directly to providers. Further, the trust should own large saleable items such as furniture and allow the beneficiary to use them as needed.
In addition to the obvious provision of funds for the disabled beneficiary over a long-term period, another key benefit of a Supplemental Needs Trust is that Trust funds are considered unavailable to the beneficiary until actually paid out by the Trust. Therefore, the Trust fund is not considered when determining the disabled beneficiary's eligibility for public benefits, such as Medicaid and Supplemental Security Income (SSI).
Funding a Special Needs Trust
Normally, the money to fund a Special Needs Trust comes from an insurance policy. In most cases a second-to-die policy is cheaper because benefits are unpaid until the second parent dies. Life insurance benefits are usually paid quickly and funds will be available when needed for the child. However, the funds needed for a Special Needs Trust can come from any source, such as personal injury awards or outright bequests.
Alternatives Pose Unacceptable Risks
Drafting and funding a Special Needs Trust is a much better alternative
for planning and providing for your loved one than disinheriting them
and hoping that siblings or others will step in and provide for any special
needs. Here's why. Over time many things can change. The lifestyle, benevolent
attitude of a sibling or family member, even their financial situation
may change, leaving the disabled person exclusively at the mercy of public
benefits.
In addition, a Special Needs Trust is preferable to giving the disabled person the funds outright, which may trigger a loss of public benefits and create a far greater financial burden. If and when their money runs out, the disabled person must then bear the entire risk of future changes in benefit eligibility requirements and uncertainty as to what benefits might or might not be available.
Continuing changes in the healthcare system today also create concern about how those changes may adversely impact disabled loved ones in the future. A Special Needs Trust can help alleviate some of those concerns, and create a more stable resource for providing for their needs.
Conclusion
Knowing that the person you care about is adequately provided for in the years to come, and that the assets you set aside in a Special Needs Trust are being managed according to guidelines you established in advance, can provide long-term peace of mind for all concerned.
MacElree Harvey
17 West Miner Street
Post Office Box 660
West Chester, PA 19381–0660
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Speak with a licensed attorney about your own specific situation.
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