The Value of a Special Needs Trust

When strategizing your estate plan, it’s crucial to consider the welfare of all your loved ones. Given the unique circumstances of each family, various trusts and mechanisms exist to address specific estate planning goals effectively.

Special needs trusts (SNTs), also known as “supplemental needs trusts,” cater to children or family members with disabilities necessitating long-term care or rendering them unable to sustain themselves financially. These trusts offer assurance that the quality of life for your loved one will improve without jeopardizing eligibility for Medicaid or Supplemental Security Income (SSI) benefits.

Preservation of Government Benefits

An SNT serves to safeguard your loved one's access to crucial government benefits covering healthcare and essential needs. Medicaid and SSI provide coverage for basic medical care, sustenance, clothing, and shelter. However, eligibility hinges on the individual's resources not exceeding $2,000 in "countable assets." It's critical to note that if your family member possesses assets surpassing this threshold, rendering them ineligible for government assistance, an SNT becomes ineffective.

Typically, most assets are considered countable, with some exceptions such as a primary residence (regardless of value, provided the individual intends to return home if residing in a care facility), a vehicle, limited life insurance, burial arrangements, and personal belongings.

An SNT, as an irrevocable trust, is crafted to complement rather than replace government aid. To maintain eligibility for benefits, the beneficiary cannot have direct access to the trust funds, and the trust must be barred from providing "support" to the beneficiary, including medical care, sustenance, clothing, shelter, or any other benefits covered by Medicaid or SSI.

Coverage of Supplemental Expenses

Within these constraints, an SNT becomes a tool to finance expenses beyond government benefits, such as uncovered medical costs, educational pursuits, transportation (including adapted vehicles), insurance, technological equipment, home modifications, and enhancements to the beneficiary's quality of life like travel, leisure activities, and hobbies.

It's imperative to ensure that funds are disbursed directly to third-party providers rather than the beneficiary themselves.

Attention to Trust Language

To avert disqualification from government benefits, an SNT should expressly forbid direct distributions to the beneficiary and prohibit the trustee from funding support items covered by Medicaid or SSI. Some SNTs delineate the types of supplemental expenses covered, while others grant the trustee discretion over non-support expenditures.

Informing Family and Friends

Following the establishment or revision of your estate plan, open dialogue with your family is essential, particularly if an SNT is part of the arrangement. To uphold the trust's terms, relatives and friends intending to offer gifts or donations must channel them directly to the trust rather than the individual with special needs.

For any inquiries regarding SNTs, reach out to us.