What to Know About Special Needs Trusts

A special needs trust can help disabled loved ones without jeopardizing their eligibility for federal and state assistance. Here, estate planning attorney, Douglas C. Lauenstein, explains what you should know about creating a special needs trust.

Special Needs Trusts are Overlooked for Federal and State Benefit Eligibility Purposes

An individual with a qualifying disability may be eligible for Supplemental Security Income (SSI) or Medicaid, but there is also a financial component to one’s eligibility for these benefits. An individual’s necessary personal effects and assets–such as their home and furnishing, car and other essentials–do not make them financially ineligible for benefits. However, other liquid assets, such as the contents of a bank account, could disqualify them for benefits if the assets exceed a certain limit.

If you were to give a disabled loved one a monetary gift that made their total yearly income exceed $16,643 (as a Maryland resident without children), they would become ineligible for Medicaid. Ability to receive SSI benefits can also be jeopardized. Money bequeathed to a disabled loved one in the form of a trust; however, is not counted toward income levels, and will not make them ineligible for state and federal benefits.   

A Trustee Will Make Decisions Regarding the Assets in the Special Needs Trust

As a part of the creation of a special needs trust, you will need to appoint a trustee, or administrator of the trust. This individual will make decisions regarding how the assets in the trust are used. The trust will not make a disabled loved one ineligible for other benefits, as long as you do not make them the trustee. The assets in the trust can be used for a wide variety of purposes to assist your disabled loved one, such as for a personal care attendant, vacations, furniture, education, vehicles, physical therapy or rehabilitation and out-of-pocket medical or dental expenses. A special needs trust typically ends when the individual passes away, or when the assets in the trust are depleted.

Special Needs Trusts May Also Be “Pooled”

For those who cannot choose a suitable trustee, or who choose to place a smaller sum of money in a special needs trust, a pooled trust may be a better option. Pooled trusts are managed by nonprofit organizations who collect and invest funds from many different donors. Each beneficiary, of recipient of a trust’s assets, is assigned a separate trust, and a trustee designated by the organization manages the trust’s assets. You can learn more about pooled trusts here.

A Lawyer Can Help You Create a Special Needs Trust

A lawyer who specializes in estate planning and trust development will be able to assist you in the creation of a special needs trust. Attorney Douglas C. Lauenstein has years of experience helping families support the needs of disabled loved ones while maintaining their eligibility for federal and state benefits–to learn more about how we can help, contact us today!

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