A Special Needs Trust, also known as a Supplemental Needs Trust, is a type of trust that allows for a person with special needs to receive support while still maintaining eligibility for government benefits.
One question parents, or other relatives, of special needs individuals may have is when to establish a special needs trust. If the special needs individual is currently receiving disability benefits, i.e. Medicaid or Supplemental Security Income (SSI), then a special needs trust should be established as soon as possible.
The reason it is important for someone receiving disability benefits to have a special needs trust in place is that any additional money they receive could endanger their eligibility for benefits. Both Medicaid and SSI are need-based programs with strict limits on assets and income for eligibility.
Having the trust in place provides a vehicle for parents, or other relatives, to safely give a special needs individual the financial support they need. Before any gifts occur, it must be made clear that all financial gifts for the individual’s benefit are made out to the trust instead of the individual.
Having the trust in place can allow for the trust to become the designated beneficiary of any number of financial assets including insurance policies, IRAs, and other accounts.
The laws regarding the proper formation and use of special needs trusts are complex. A special needs trust should only be drafted by a local attorney who has experience with special needs trusts. Trust law can vary significantly from state to state. Additionally, the laws and regulations governing special needs trusts can change over time.
An experienced attorney can work with clients to make sure that the special needs trust meets the client’s specific situation. The attorney can also discuss the proper way to operate the trust to ensure that special needs individual maintains their benefit eligibility. Over time, the attorney can also make sure that the trust keeps up with any relevant changes in the laws and regulations governing special needs trusts.
To create, or review, a special needs trust for your situation, please call Mitchell, Brown & Associates at (314) 962-0186.