Supplemental Needs Trusts

Special Needs Trusts

A supplemental needs trust can be used to shelter assets from the costs of long term care.  Most of the time assets are trying to be preserved from getting picked up by Medicaid, which is the largest government program that pays for long term care.  A supplemental needs trust allows assets to be separated from an individual, with the idea that the assets will be passed onto children or other heirs, instead of paid to the government.  A supplemental needs trust is designed to allow someone to qualify for Medicaid without needing to spend all of their assets first.

A special needs trust can be used to shelter assets from the costs associated with the care needs of someone who is disabled.  One government program involved is Medicaid, but there are many other programs available to provide care to someone who is disabled.  As special needs trust allows assets to be separated from an individual, with the idea that the assets can be used to care for the disabled person, instead of turned over to the government first, and anything leftover will be passed onto children or other heirs.  A special needs trust is designed to allow someone to qualify for government assistance without needing to spend all of their assets first.

A Supplemental Needs Trust can be set up as a revocable, or an irrevocable trust.  Revocable trusts are established by someone other than the individual to give money that can be used for care to the individual receiving care, and doing so in a manner that will ensure the money goes to the individual, and not to Medicaid, or another part of the government.  This is part of where the term “gift trust” comes from, as someone is setting up a trust to hold a gift from someone else.

Typically a Supplemental needs trust is set up as an irrevocable trust.  Irrevocable trusts can be set up by a third party in a manner similar to the revocable trusts, but may also be set up by the individual who needs care, themselves.  Setting up a trust for yourself may involve planning for the Medicaid look-back period, a 5 year window where assets put in trust may count against someone who is trying to obtain Medicaid.  Early planning is needed to plan around the 5 year window, and careful planning is needed to make sure the trust will work for this purpose.  If you want to preserve assets from Medicaid, you should consult with an experienced attorney to plan the right way.

A Special Needs Trust can be set up as a revocable, or an irrevocable trust.  Revocable trusts are established by someone other than the individual to give money that can be used for care to the individual receiving care, and doing so in a manner that will ensure the money goes to the individual, and not to the government.  This is part of where the term “gift trust” comes from, as someone is setting up a trust to hold a gift from someone else.

Irrevocable trusts can be set up by a third party in a manner similar to the revocable trusts, but may also be set up by the individual who needs care, themselves.  Setting up a trust for yourself may involve planning for the Medicaid look-back period, or the look-back period of a different government program.  Early planning is needed to plan around such look-back periods, or penalty periods, and careful planning is needed to make sure the trust will work for this purpose.  If you want to preserve assets from the government, you should consult with an experienced attorney to plan the right way.

Supplemental Needs

Special Needs

The term Supplemental Needs Trust specifically applies to Medicaid and trying to qualify for Medicaid.  The term is based on the laws and regulations that govern qualifications for Medicaid.  Medicaid regulations can be quite complex, but since the regulations allow for money to be paid out to an individual’s “supplemental needs” without affecting Medicaid eligibility, this type of trust can be quite useful when planning to qualify for Medicaid assistance to pay for long term health care costs.  “Supplemental Needs” are usually things that people need when they are receiving Medicaid, but not things that Medicaid pays for, hence the Trust can supplement the amounts paid by Medicaid for their care out of Trust funds.

However, a supplemental needs trust may not even be sufficient for some government programs other than Medicaid.  The VA Aid and Attendance program can pay for long term care of wartime veterans, but if a person has a supplemental needs trust, assets inside of such a trust may not be protected for VA Aid and Attendance purposes.  Careful planning of what resources are available needs to be done for the type of assistance you are seeking.  Consulting with an experienced attorney to use the correct type of planning is critical in these types of cases.

Special Needs Trusts are designed to protect assets for those who are disabled, not just those who want to receive Medicaid.  Certainly Medicaid can help pay costs associated with someone who is disabled, but so can other programs like SSDI, or any other number of programs administered by the federal, state, or local governments.  Each different program may have its own asset limit and income limitations.  When setting up a special needs trust, the asset and income limits need to be carefully considered for each program involved.  Not every program is the same, so setting up a special need trust may mean the trust needs to be specifically tailored to the terms of the specific program.

A trust might need to be written so as to be ultra conservative and allow a beneficiary to qualify for more than one program, while still keeping the limits low enough to account for the asset and income limits of multiple programs.  A special needs trust allows the trust to pay for “Special Needs” that a government program does not cover.

When considering how to set up a special needs trust, some flexibility in the language of the trust may be used to account for different programs.  However, you will want to consult with an experienced attorney to properly set up a special needs trust.