A special needs trust can be very helpful for families who have a member with a serious physical or mental disability. If the person will be relying on government benefits to pay their expenses, a special needs trust can give them a little financial flexibility that won’t interfere with those benefits. There are other reasons to use this type of trust, as well.
The problem with leaving a bequest to a public beneficiary
Whether due to a physical or mental disability, many people with special needs cannot work at all. When this is the case, they may be entitled to receive Supplemental Security Income (SSI), Medicaid, subsidized housing, vocational rehabilitation or other benefits. These programs are intended for people without other resources, however, so they have strict income and asset guidelines.
A special needs trust is not a way to game government programs. Most of the time, the person setting up the trust doesn’t have the financial ability to support the disabled person or a great deal of money to give.
Unfortunately, even leaving a few thousand dollars to your loved one in a will could result in the interruption of benefits even though it doesn’t fundamentally alter their financial situation.
When a special needs trust is set up correctly, government programs ignore them when determining eligibility. They should be set up so that the trustee, not the beneficiary, purchases goods and services in the beneficiary’s interest. The trustee could be a family member, another trusted person, or a hired person.
Other benefits of a special needs trust
Special needs trusts are not just for people on public benefits. These trusts can be set up to focus on the specific needs of the person with the disability. Other trusts are not intended for this purpose.
As with any trust, the decisions a trustee makes must be made in the beneficiary’s interest. However, this can include a wide variety of things from a personal care attendant or education to home furnishings or a vacation.
If your loved one were to receive other money, it can be put directly into this trust. An additional advantage is that the trust money is not available to creditors, so your loved one cannot lose the trust by getting into debt or being sued, for example.
If you have a family member with special needs, talk to an estate planning attorney about a special needs trust. We do not recommend using an online form, as there are individual considerations that may not be addressed by a do-it-yourself trust form.