The desire to protect your, a family members or a client's eligibility for government benefits shouldn't make you avoid taking a legal settlement you deserve or a inheritance. With a correctly designed and appropriately funded special needs trust, eligibility for government benefits will be unaffected.
We specialize the drafting and design of special needs trusts for individuals on means-tested benefits, like Medicaid, Food Stamps (SNAP) and Social Security Disability Insurance (SSDI). Importantly, if you, a family member, or a client receive government benefits and are facing down the possibility of receiving a legal settlement or an inheritance, please contact my office for a free consultation.
Additionally, we also provide Qualified Settlement Fund (468B) Trust design and standard spendthrift trust design. For additional information, please feel free to contact us.
A special needs trust (also referred to as a supplemental needs trust) is "a trust established to provide supplemental income for a disabled beneficiary who is receiving or may be eligible to receive government benefits. Blacks Law Dictionary. Simply put, assets placed into a special needs trust will not jeopardize your government benefits.
This is because under federal law, if assets are placed in this trust, they are not counted under resource counting rules for government benefits. See 42 U.S.C. 1396p(d)(4)(A).
Anyone who is currently or anticipates receiving means-tested (income and asset dependent) benefits, who is about to receive money in excess of those means tested levels should consider a special needs trust.
You should consult with an attorney who deals with special needs trusts before making the decision, as there may be low cost alternatives (i.e. ABLE accounts or Pooled-Trusts) which may better suit your situation.
The following are required to set up a special needs trust:
As mentioned above, a special needs trust may be established through the actions of the individual, a parent, a grandparent, a legal guardian, or a court.
Importantly, prior to 2016, the disabled individual could not set-up their own special needs trust.
A special needs trust is meant to supplement or enhance the quality of life of the beneficiary. Governmental benefits are meant to provide for essentials, like medical care, food, clothing, and shelter. Payments from the trust must supplement and not pay for these essentials.
Some examples of what a special needs trust may pay for include, but are not limited to:
The following are some good resources that can help you determine what a trustee can pay:
Every Special Needs Trust is required by law to reimburse State(s) Medicaid Plans amounts up to the amount equal to the total medical assistance paid on behalf of the individual under a State Medicaid plan. This means if assets remain in the trust at the time of the beneficiaries death, those assets must first go to reimburse the State(s) Medicaid plan before a distribution to another would be allowed.
The initial cost associated with the drafting of a special needs trust can vary greatly with some practitioners charging several thousands of dollars. And it is important to understand that costs will also vary based on the complexity of your situation.
The costs associated with administering the trust can quickly add up. Generally, there will be a trustee fee, a investment management fee, an accounting fees, and taxes. Taxes and the accounting fees are generally unavoidable, but if a family member can serve as trustee and you can place the money with a local bank, you may be able to save considerably.
This is a tricky question. Paying for housing directly will impact your benefits; If the special needs trust pays the mortgage or rent, your benefits will be reduced.
Your Special Needs Trust can own a home, but remember all of the trust property is subject to a Medicaid sweep upon the death of the beneficiary. This would include a home, if owned by a Special Needs Trust.
Yes. The Trust will have to file an annual tax return and pay taxes on any earnings.
Yes, until the beneficiary reaches the age of 65. After this time no assets may be added to a Special Needs Trust. This restriction does not stop a Special Needs Trust from earning interest or value on investments, or receiving predetermined annuity payments from a structured settlement.
The information you obtain at this site is not legal advice. You should consult an attorney for individual advice regarding your own situation. If you have specific questions, please contact us.