How a Special Needs Trust Helps Preserve Government Benefits
Families often worry about how to provide long-term support without disqualifying their child or relative from essential government programs like Supplemental Security Income (SSI) or Medicaid. That’s why a special needs trust is crucial.
What Is a Special Needs Trust?
A Special Needs Trust (SNT) is a legal arrangement to benefit those with physical, mental, or emotional disabilities. It holds and manages assets on behalf of the disabled person without affecting their eligibility for means-tested government benefits.
The trust is managed by a trustee who controls disbursements and ensures funds are used to supplement, not replace, government assistance. Special Needs Trust trustees often oversee financial activities such as out-of-pocket medical expenses, personal care items, education, transportation, and vacations.
Government benefits can be jeopardized without an SNT. For example, SSI and Medicaid base eligibility on income and assets, so disabled individuals receiving financial gifts or inheritances are at risk of exceeding asset limits.
Types of Special Needs Trusts
First-party SNTs are funded with the disabled person’s assets and must include a Medicaid payback provision, meaning funds left after the beneficiary’s death must go toward reimbursing Medicaid for services rendered.
Third-party special needs trusts are set up and funded by someone other than the primary beneficiary. It doesn’t typically require a Medicaid payback provision, so it’s often ideal for long-term care that preserves government benefit eligibility.
Pooled trusts are completely different. They’re managed by a non-profit organization or an estate planning attorney. With pooled special needs trusts, each beneficiary has a sub-account. Speak to an estate planning attorney at Nicole Pavlik Law Firm today to learn more and explore your options.
Using a Special Needs Trust to Preserve Government Benefits
The primary benefit of a Special Needs Trust is that it helps keep assets outside the direct control of the disabled individual. Since they don’t own the trust funds, those assets aren’t counted toward SSI or Medicaid eligibility. The trustee pays for items and services not covered by government benefits, supplementing the individual’s quality of life without threatening their access to health care or housing.
Mistakes to Avoid
Families can unintentionally disqualify a loved one from SSI, Medicaid, and other government benefits, even with the best intentions. Here’s how:
- Leaving assets directly to the individual
- Failing to properly secure the trust
- Naming the wrong trustee
- Using trust funds for basic needs that government programs already cover
Work with an experienced estate planning attorney to help draft a compliant Special Needs Trust that fulfills your intentions and aligns with all relevant state and federal regulations. Contact the Nicole Pavlik Law Firm to get started.
The Role of an Estate Planning Attorney
Setting up an SNT involves more than filing forms. Qualified estate planning attorneys will ensure the trust complies with Social Security and Medicaid rules. They can also customize the trust based on your family’s goals and financial situation.
Estate planning attorneys may help choose a reliable trustee or coordinate the trust with your overall estate plan, including wills, powers of attorney, and guardianship. A mistake in words or structure can cost your loved one their benefits or leave them financially vulnerable. Find reliable legal support for peace of mind.
Contact Nicole Pavlik Estate Planning Attorney
A Special Needs Trust (SNT) is a financial tool and a lifeline. Create a compliant and compassionate trust tailored to your family’s needs with the estate planning attorneys at the Nicole Pavlik Law Firm.