Special Needs Trusts Can Build Wealth While Protecting Access to Public Benefits

October is Special Needs Law Month. Every year special needs attorneys and advocates organize to help raise awareness and educate those with special needs, their families, and caregivers about their legal rights and care options.

One of the most important services they provide, is planning guidance. Or, how best to provide long-term stability for a family member with a physical or mental disability, even after their parents or guardians have passed away. Often, the best way to do this is through a Special Needs Trust.

A Special Needs Trust is a type of irrevocable trust that specializes in allowing disabled people to use assets held in trust for their benefit, while at the same time allowing them to receive essential government benefits, like Medicaid and Supplemental Security Income. An additional protection is that a Special Needs Trust can hold and manage property intended  for a special needs person but without giving them control if he or she lacks the legal capacity to handle his or her own affairs.

Normally, government programs have very low income thresholds. One gift of $2,000 given directly to a special needs person from a loving relative, for example, could undermine entire eligibility status. Further, the gift doesn’t even have to be cash to disqualify the person.

Thankfully, money given to a Special Needs Trust shields disabled persons from these income limits because they won’t technically own the assets. Instead, under this estate planning technique, the trust will.

In these scenarios, Medicaid and Supplemental Security Income would provide for basic healthcare and living needs, while the Special Needs Trust could provide for “special needs,” such as educational programs, specialized therapies, and even comfort and luxury items. Public funds are not meant for these purposes.

Here is a word of caution. If the Special Needs Trust is used to pay for basic items, like groceries and simple housing costs, or if payments are made directly to the beneficiary, then those payments could be construed as income and your special needs family member could lose public benefits. In addition, the Supplemental Security Income program does not allow for cash to be given directly to a Special Needs Trust beneficiary. This can include groceries, rent, mortgage payments or electric utilities. It is important to speak with your attorney to learn how to make proper distributions.

We know this article may raise more questions than it answers for you. Do not wait to contact our office to schedule a meeting with attorney Anne’ Desormier-Cartwright.