Preserving Public Benefits With a Supplemental Needs Trust

Relatives of people with special needs often worry about who will care for their disabled loved ones when they are gone. One way that concerned family members can plan for their disabled relatives' futures is by creating a Special Needs Trust. But, people need careful estate planning to make sure that such trusts do not disqualify their loved ones from receiving public benefits, either at the time they establish the special needs trust or in the future should the trust beneficiary get money from another source.

Special Needs Trusts

A special needs trust is a flexible estate planning tool that can fund a broad array of things under the term "special needs," including medical care and products as well as a variety of measures that enhance quality of life like adaptive equipment for communication, adapted vehicles, special education or training and higher-expense nursing homes.

There are two types of special needs trusts: a General Support SNT and a Supplemental Care SNT. A General Support SNT provides money for the care of the trust beneficiary, and such funds are considered "available resources" when government agencies calculate eligibility for need-based benefits such as Medicaid and Social Security Disability Insurance. Consequently, a Supplemental Care SNT is a far more popular option because the terms of the trust state that its assets are only available as a supplement to any available government benefits and, therefore, do not count as "available resources" for the purposes of public-benefits eligibility.

Protecting Eligibility for Public Benefits With a Trust

Sometimes people wish to give people with special needs a monetary gift or inheritance. However, these gifts may disqualify the person from receiving public benefits because they are considered "available resources" when calculating need-based public benefits, even if the person is the beneficiary of a Special Needs Trust.

To avoid the risk of the trust beneficiary losing government benefits because he or she has too much money or "available resources," a person can also set up a "stand-by" Supplemental Care SNT when creating the primary Supplemental Care SNT. The stand-by Supplemental Care SNT can act as a common vessel for any gifts or inheritance the beneficiary receives in the future. The donor merely need incorporate the terms of the stand-by Supplemental Care SNT into his or her instrument of transfer and will not risk disqualifying the beneficiary from public benefits.

Setting up a long-term financial plan to care for a loved one with special needs is a complicated matter. If you are wondering how to care for a relative with special needs in the future, do not hesitate to contact an estate planning attorney to discuss how a special needs trust can help.