When you have a family member with special needs, it’s important to make a plan to care for them. Many special needs plans include trusts for a host of reasons related to the loved one’s level of capacity to manage funds or to work. Special needs trusts are often used when a disabled loved one needs ongoing services from the government, most likely for their entire lives, including Medicaid and Supplemental Security Income (SSI).
Because of the way that such governmental assistance programs are engineered, individuals who need to receive assistance from them are not permitted to possess income or assets that exceed a certain amount and still be considered eligible for the program. What this means for their family members is that directly handing them an inheritance or giving them assets in the form of a gift might put their future living situation in jeopardy (as could a personal injury settlement). Yet it would fly in the face of humane care, and even offend the conscience, to not permit families to help their loved ones with special needs and improve the family member’s living conditions and quality of life beyond what is supplied by governmental programs.
Establishing a Third-Party Special Needs Trust is one way to provide for the loved one with a disability while preserving the loved one’s access to needed government benefits. These trusts are designed to increase the resources available to your disabled loved one without causing them to be denied the assistance upon which they rely. Third-Party Special Needs Trusts are funded by someone other than the person with special needs—usually a family member or, somewhat less often, a friend.
The trustee who administers the Third-Party Special Needs Trust uses the funds to purchase goods and services that allow your loved one to lead a richer, fuller, more dignified life, while preserving your loved one’s eligibility for needs-based benefits.
Naturally the sorts of things that can improve the quality of life of a person with disabilities are many and varied. But they may include such things as electronics, educational equipment and courses, recreational programs, vacations and other outings, sports and hobby-related items, medical services, equipment and devices that the public benefits do not cover (or upgrades to the basic equipment or devices that are covered) transportation expenses; household items; furniture; clothing; and so on.
At the same time, there are some things that the trustee cannot provide to the beneficiary of a Third-Party Special Needs Trust without affecting particular benefits. Mortgage payments, homeowner’s insurance, rent, real estate taxes, utilities such as gas and water (but not cell phones or Internet), and cash payments along with other items made directly to the beneficiary may all be off-limits depending on the needs-based benefits the trust beneficiary receives. As such, it is important that a trustee of a Third-Party Special Needs Trust be current in their knowledge of the various laws and regulations affecting such trusts, as well as the mechanics of disbursement.
At the death of the Third-Party Special Needs Trust beneficiary, no repayment to the state is required and the remaining assets held by the trust can be left as an inheritance to whomever the person who established the trust names. That allows the person who established the trust to both benefit their loved one with special needs and provide an inheritance to others after the beloved beneficiary’s death.
We Can Assist with a Special Needs Trust
If you’re wondering whether a Third-Party Special Needs Trust might be right for your loved one with disabilities, attend one of Promise Law’s free estate planning workshops. These workshops provide a great foundation of information that everyone needs to make sound planning decisions. Moreover, if you attend a workshop, you also get a complimentary one-on-one consultation with one of our attorneys.