When I was a little child, my mother always told me that I was special. She told my siblings the same thing, and we believed it. Somewhere around Junior High, my classmates began to use the word special with a different meaning, calling someone “special” if they seemed different, or acted differently than what my classmates considered normal. The usage of this word began to bother me, as it was used in a mocking manner, and seemed to have been co-opted for that purpose.
Somewhere in High School or college, the mean-spirited us of the work special seemed to fade away. Apparently those around me matured a bit, or at least my classmates were not overt in mocking people. I nearly forgot about the use of the word “special” as an insult, and just used it to describe something of unique worth and qualities until I got into my estate planning career. As I learned about trusts and how to structure them, I came upon the term “special needs trust.”
I remembered the mocking use of the word “special,” and thought of how I could now put my new legal skills to use working for people who truly were special, and deserved to be called that.
A special needs person is someone who requires assistance due to a mental, physical, medical, or psychological disability. These truly are special people who deserve special attention and consideration. Many times government programs have been established to assist people with special needs to survive, or function, in society. These government programs include Social Security, SSDI, Medicaid, and many other Federal, State, and local government programs designed to help the needy among us. Most of these programs have asset requirements, since the programs are designed to assist the poor and needy in our country.
Special Needs Trusts Allow For a Better Quality of Life
A special needs trust is a trust designed to improve the quality of life of a person with special needs. Generally this involves setting up a trust structure that allows a person with special needs to get money from the trust, without having the full amount of the trust be counted as an asset to the person. With a special needs trust, the individual does not own the assets directly. Instead, the trust owns the asset, and therefore a special needs person’s access to government benefits is not affected by the assets held by the trust. Special Needs trusts are generally irrevocable to separate a person from the assets.
Who Needs a Special Needs Trust?
There are many reasons a person might need a special needs trust. One reason might be the need for long term care when you are elderly, so Medicaid would apply. Other individual might have been injured, or are sick, so SSDI would apply. Another person might have fallen on hard times, become addicted to some sort of drug, and need assistance. Or, someone may have been disabled for a long time, even from birth, and just need assistance to live their own life. No matter what the circumstances were that led someone to need assistance, a special needs trust can be helpful.
Watch Out for the Asset Limits
Many government programs have asset limit for those who receive benefits, and so keeping assets out of someone’s hands personally can be beneficial. Special needs trusts allow assets to be used for a special needs person, while not counting against the person in qualifying for a government program. In many cases, special needs trusts are essential to allow someone to receive a benefit.
By establishing a trust to hold assets for the benefit of a special needs person, instead of giving money to the special needs person outright, the special needs person may be able to qualify for a program that would otherwise be unattainable. Setting up a special needs trust can allow the special needs person to live a more comfortable life, while still benefiting from the government program set up to care for the special needs person.
What Costs Can a Special Needs Trust Cover?
Special needs trusts can pay for items above and beyond what is paid for by public assistance programs run by the government. Money in a trust can be used to help pay for costs that are not covered by government programs, but might be necessary for life. For instance, if a person is receiving money from Medicaid to cover the cost of long term care, money from Medicaid can be used to pay for medical care, which could include the cost of staying at a long term care facility. Long term care facilities provide a place to stay, food, medical care, and other similar services, but the facilities generally do not provide clothing, or other personal items.
A special needs trust can help provide these things to the special needs person. A person receiving Medicaid would use a specific type of special needs trust, called a “Supplemental Needs Trust,” but the function of the trust to protect assets is the same. Money from a special needs trust can also cover medical expenses, or long term care expenses that are not covered by Medicaid or another program, usually at the Trustee’s discretion.
Choosing the Right Trustee is Especially Important
A Trustee of a special needs trust will need to use trust funds to support a special needs beneficiary without jeopardizing government benefits. Distributions cannot exceed the income limits established by a government program. Distributions also cannot be too large at any given time to exceed the asset limits established by government programs. These duties are in addition to normal trustee duties of administering the trust, investing assets, and handling normal distributions, and will require a Trustee to keep up to date with the needs of a special needs beneficiary.
The Trustee will need to keep up on the asset and income limits a special needs beneficiary has to make sure the special needs person is cared for, while not exceeding the asset and income limits that a certain government program may have in place. These asset and income limits can vary based on the type of program involved, as well as the age and health of a special needs person, and other factors that may be involved in specific programs.
Is a Special Needs Trust Right for You?
The specific considerations of each program need to be taken into account to set up a special needs trust properly. Special attention to the requirements of the program and the special needs person must be taken into account. The special attention for a special needs person is part of a proper plan to care for the special person, and that is using the word correctly. To determine if you, or someone you love, could benefit from a special needs trust, schedule an appointment here.