Do you have a child or other relative who has a physical, developmental, or intellectual disability and receives or might be eligible to receive government benefits? If so, a Special Needs or Supplemental Trust (or SNT) might be appropriate.
What Type of Special Needs Trust Do I Need?
If you have a loved one with a disability or special needs it is likely they are also receiving assistance from state and/or federal programs such as Medicaid or Supplemental Security Insurance (SSI). As such, you must take great care when gifting assets to the individual or anytime the individual receives funds directly, because such could put these benefits at risk. A special needs trust is one solution to this problem. Our attorney, Richard L. Gershberg, can help you decide which type of trust is right for you and your family.
Why Is This Kind Of Trust Necessary?
As the parent or loved one of a child with special needs or person with a disability, you must take special care when estate planning because gifting or planning an inheritance of assets directly to your child or loved one could do more harm than good. Adults with special needs or disabilities often depend on state and federal assistance programs such as Medicaid, Medicare, or SSI. Those programs, however, typically have income and asset limits that recipients cannot exceed. Gifting assets to someone with a disability or special needs, therefore, can result in disqualification for many of these much-needed programs. The solution is often found in the creation of a special needs trust.
Third Party SNT
As the name implies, a third-party special needs trust is established by the third party with assets of the third party for the benefit of a person with a disability or with special needs. This type of trust is most often established by a parent, grandparent, or other family member, for the benefit of a child with special needs and uses assets of the parent or family member. This type of trust must include specific language and must be worded such that the assets in the trust are actually distributed to a third party, such as the parent as Trustee, to be used for the benefit of the individual with special needs. Because the assets held in the trust are not available to the beneficiary, those assets do not disqualify the beneficiary from eligibility for assistance programs such as Medicaid and SSI. In fact, the idea behind this type of trust, which is also referred to as a “supplemental needs” trust, is that the assets held in the trust will be used to “supplement” the benefits provided by the state and federal government.
First Party Special Needs Trust
The other common type of special needs trust is a first party, or self-settled, special needs trust. This type of special needs trust is established using assets of the disabled individual or person with special needs. It must be established by the parent, grandparent, guardian of the person with a disability, or by a court. Only the person with a disability can be the beneficiary of the trust. This type of special needs trust is most frequently needed when a disabled individual receives a lump sum of money, such as the result of a settlement for injuries in a personal injury accident or an outright inheritance. The lump sum would likely disqualify the beneficiary from eligibility for assistance from Medicaid, SSI, and other state and federal assistance programs. One of the other important differences between a third part and a first party special needs trust is that with a first party trust, any assets remaining in the trust upon the death of the beneficiary must be used to pay back Medicaid. With a third-party special needs trust there is no need to worry about repaying Medicaid.
Contact Our Office Today For Assistance
For more information, or if you have additional questions or concerns about whether or not this type of trust is right for you, or about special needs planning within your estate plan, contact Richard Gershberg and his staff, the experienced Owings Mills Estate Planning and Medicaid planning attorney at Gershberg & Associates, LLC by calling 410-654-3850 to schedule an appointment.