What Are Special Needs Trusts?
Special Needs Trusts can provide ongoing supplements for an individual with disabilities in order to improve the quality of life after their caregiver is no longer alive.
Why Should I Consider A Special Needs Trust?
The purpose of a Special Needs Trust is to provide future support for a disabled individual, all while protecting their eligibility for government benefits. Just like different types of trusts, SNTs offer shielding from creditors and, in some cases, offer the grantor the option to distribute the funds after the death of the beneficiary.
Great care must be used in creating a special needs trust correctly to protect the person’s eligibility to receive Supplemental Security Income (SSI) and Medicaid benefits. Once the trust is established, the trustee disburses estate finances as needed for buying goods and services for the special needs beneficiary. No money can be given directly to the individual, but the costs of things like furniture, vacation expenses, education expenses, vehicles, recreational expenses, medical needs, dental needs, and so on may be covered by the trust as needed.
What Kinds Of Special Needs Trusts Are There?
There are two popular types of Special Needs Trusts that can be created; First-Party SNT and Third-Party SNT.
First-Party SNTs, or self-settled trusts, are available to those with disabilities who are under 65 years of age. The main goal of this trust is to provide a supplement to Medicaid and Supplemental Security Income. A typical downside is that a payback provision to the States must be made for Medicaid plans, and any balance left in the trust has to be paid back to the States after the beneficiaries death. These are often used by those who already own property, receive an inheritance, or receive a court-mandated settlement.
A Third-Party SNT exists to supplement Medicaid and SSI without the payback to the States, and also allows for the trustee to designate other beneficiaries to distribute other assets. This is possible since the funds for the trust come from someone other than the beneficiary. These are often utilized by those who want to maintain the supplement but have control over where the distribution goes after the death of the beneficiary. These are often chosen by those who have a child with special needs, and will typically name an independent party as the trustee.
What If I Don’t Have A Plan?
If you do not set up a Trust for your special needs child, you are leaving them at risk. Without a plan, assets that go to your child could put their eligibility for programs like Medicaid on the line, and severely inhibit their quality of life. Trusts like these are designed to help you continue to provide for your child once you are no longer able to.
How Can I Find Out More?
In Arizona, a special needs trust can be set up by anyone, including the intended special needs beneficiary. For more information on drafting a trust, assigning trustees, trust disbursement requirements and more, contact our office to set up an appointment.