Special Needs Trusts

Special Needs Planning & Trusts

Special needs trusts (also known as “supplemental needs” trusts) allow a disabled beneficiary to receive gifts, lawsuit settlements, or other funds and yet not lose his or her eligibility for certain government programs. Such trusts are drafted so that the funds will not be considered to belong to the beneficiary in determining eligibility for public benefits.

As their name implies, special needs trusts are designed not to provide basic support, but instead to pay for comforts and luxuries that could not be paid for by public assistance funds. These trusts typically pay for things like education, recreation, counseling, and medical attention beyond the simple necessities of life. (However, the trustee can use trust funds for food, clothing, and shelter if the trustee decides doing so is in the beneficiary’s best interest despite a possible loss or reduction in public assistance.) Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (such a specially equipped vans), training and education, insurance, transportation, and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive spending money, electronic equipment and appliances, computers, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses.

Often, special needs trusts are created by a parent or other family member for a child with special needs (even though the child may be an adult by the time the trust is created or funded). Such trusts also may be set up in a will as a way for an individual to leave assets to a disabled relative. In addition, the disabled individual can often create the trust himself, depending on the program for which he or she seeks benefits. These “self-settled” trusts are frequently established by individuals who become disabled as the result of an accident or medical malpractice and later receive the proceeds of a personal injury award or settlement.

What are the Advantages of a Special Needs Trust?

The primary advantage a Special Needs Trust offers over a direct gift or inheritance is that, if arranged properly, the assets in the trust do not actually belong to the beneficiary.  In this way, the trust can provide benefits to an individual but not cause the individual who has a disability to be disqualified from government programs.

A Special Needs Trust holds title to property for the benefit of a child or adult who has a disability.  The Special Needs Trust can be used to provide for the needs of a person with a disability and to supplement benefits received from various governmental assistance programs.

Special Needs Trusts typically provide for:
  • Core Needs
  • New Medical Techniques
  • Education
  • Custom Living Arrangements
  • Companionship
  • Recreation
  • Social Services

Why is it important to work with an Attorney  who specializes in Special Needs Trusts?

It is important that special needs trusts not be unnecessarily inflexible and generic. Although an attorney with some knowledge of trusts can protect almost any trust from invalidating the child’s public benefits, an attorney without special needs experience may not customize the trust to the particular child’s needs, and the child may not receive the benefits that the parent provided when they were alive.

Another mistake attorneys without special needs experience make time and time again is putting a “pay-back” provision into the trust rather than allowing the remainder of the trust to go to others’ upon the special needs child’s death. While these “pay-back” provisions are necessary in certain types of special needs trusts, an attorney who knows the difference can save your family hundreds of thousand of dollars, or more.

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