Special Needs Trusts

Individuals with disabilities frequently rely on government programs to provide basics such as food, clothing and shelter, as well as various services and supports. Most of these government programs are needs based, requiring the recipient’s income and resources to stay within program limits. While this amount will vary from one year to the next, resources in excess of $2,000 will probably disqualify an individual from receiving public benefits.

What then, can be done for the individual with a disability who inherits a sum of money in excess of $2,000 from a relative, or who will receive a settlement as a result of a personal injury suit? What do parents do, if they want to leave their assets to provide for their child with special needs after they die?

Special Needs Trusts (SNTs) are designed just for these instances. Both a First Party SNT, which contains assets contributed by the beneficiary (ex., inheritance or settlement of a lawsuit) and a Third Party SNT (a/k/a a supplemental needs trust), which is funded by persons other than the beneficiary (ex. a devise directly into the SNT under a parent or grandparent’s will) are intended to allow the individual with a disability to continue to be eligible for means tested government benefits. Of course, the SNT must be properly drafted so that it achieves its goals, which are:

  • Preserve eligibility for government programs,
  • Enhance the beneficiary’s quality of life,
  • Supplement the services provided by the government, and
  • Avoid recoupment by the government.

Proper drafting is critical. A SNT must be compatible with the beneficiary’s needs while limiting the beneficiary’s legal right to access the trust funds, as access can jeopardize the individual’s eligibility for benefits. A SNT must be used to supplement not supplant benefits received by government programs. When properly utilized, A SNT is a valuable tool offering assurance and peace of mind that your loved one will be provided for.

This article is intended as general information and not as legal advice. If you would like to discuss whether a Special Needs Trust is appropriate in your Estate Plan or for your loved one with special needs, contact an attorney at Maselli Warren, P.C. to schedule a consultation where we will meet to discuss your particular circumstances. If you already have a Special Needs Trust and it is over five years old, consider having it reviewed by an attorney to be sure it is in compliance with current laws.