Special needs trusts, also called 'supplemental needs trusts' are legal entities that allow a person to set aside money to provide for a loved one with a disability. Many disabled individuals are unable to work and rely on income-based public welfare to survive. In order to avoid having a disabled individual become disqualified for those benefits and, consequently, quickly exhausting their cash resources until they are eligible again.
The purpose of a special or supplemental needs trust is to supplement not supplant public benefits. We use these trusts to ensure that the disabled beneficiary has the highest quality of life possible.
Does the government get to take the money I put into a special needs trust?
It depends. The rules governing payback provisions are very technical. As a general rule, if the disabled individual themselves created the trust with their own funds, say, from a legal settlement, then yes, anything remaining in the trust after the disabled beneficiary dies will be paid to the government. If, however, a third party used their money to set up a trust for the disabled beneficiary, then the funds are not payable to the government.
If I set up a special needs trust for my disabled child, can they take money out of it?
A special needs trust must be carefully created so that your child remains eligible for public funds, including SSI and Medicaid. This means that, generally, no - your child will not be able to take money out. However, when we create one of these documents, we draft things so that your child will be provided with funds for everything they need.
What is a trustee and how do I choose one?
The trustee will be the person who manages the funds and distributes them for the benefit of the disabled individual. Most often, a parent or guardian of the disabled beneficiary serves as trustee. A trustee must be someone you and the disabled beneficiary trust. Being a trustee is a big responsibility and sometimes it is better to have a corporation or business serve as trustee. Many banks and non-profits have trustee services available. It is likely, however, that a corporation or other organization will charge a fee.
I have a joint bank account with my disabled child. Isn't that enough?
A joint bank account is not an effective protection for disabled individuals. First, it will not do anything to protect your child from losing public benefits. The bank account is a 'resource' and will be counted against your child in the event they need to apply for SSI and/or Medicaid. Secondly, when you die, your child will own all of the money in that bank account automatically - this again risks having them bumped off of benefits. A final consideration is that bank accounts do not protect disabled individuals from the so-called 'designing persons'. Unfortunately, disabled individuals often fall victim to fraud and financial abuse. Such wrongdoings are much easier to perpetrate when the disabled individual has a bank account, rather than a trust.
Special needs trusts offer comprehensive protection for disabled individuals. Joint bank accounts will not do anything that a trust does to protect your disabled child.
I want to leave my disabled grandchild a gift in my will. Do I have to create a trust now?
If you wish to finance a trust with funds from your estate, we can create a will that includes a special needs trust. We can also set one up now, which can be used if you'd like to give gifts to your grandchild before you die. Even if you wish to give a few hundred dollars a year, it is still a good idea to set up a special needs trust.