Betty and Lauren discuss the importance of special needs trusts.
Special Needs Trusts
Families should ensure that any private funds do not jeopardize the person’s eligibility for public benefits such as Medicaid and Supplemental Security Income (SSI). A special needs trust can be a supplement to the person’s public benefits. A special needs trust is a legal vehicle that manages funds for the benefit of a person who needs some assistance in daily living. There are two basic kinds of special needs trusts:
- A first-party special needs trust can be funded by a person with I/DD’s own money, perhaps from a lawsuit or a lump sum payment from Social Security.
- A third-party special needs trust contains money placed in the trust by family members or other third parties. This money can be from a gift, inheritance, or from the proceeds of life insurance.
Why a trust?
By using a special needs trust, families can provide on-going support to an individual with I/DD even after the parents or caregivers have passed away. Medicaid and SSI also have limits on how much a person may earn and in how much he or she may have in assets. If a person goes over those income or asset limits, he or she may lose those benefits and vital services may stop.
What Can a Trust Pay for?
Special needs trusts are used to purchase many goods and services not covered by SSI and the Medicaid program in the individual’s state. Here are a few examples:
- Dental care costs, foot care, and special therapies not covered by Medicaid or Medicare
- Service animal and assistive technology expenses
- Communication devices and computers
- Family trips and other recreational activities
- Car insurance
- Pooled Trust – Managed by a non-profit organization. Individual accounts are established for each beneficiary. The accounts are pooled together for investment purposes and maintained in one pooled trust. Often, you can establish an account in a pooled trust without any funds and later fund it with a life insurance policy or through a will. Learn which chapters of The Arc manage a pooled trust near you.
- Individual Trusts – Established privately by the individual or family. An individual trust can be managed by a professional trustee or by a family member or friend.
Who is going to help manage the money?
- Pooled trusts are administered by non-profit organizations and respond to requests for disbursements from the beneficiary or an authorized representative.
- If you create an individual trust, you will need to determine who will be responsible for managing and disbursing the money. The trustee must maintain knowledge of federal and state laws and tax code that apply to public benefits and trusts.
- A trusted family member or friend may be involved in helping the person with I/DD make financial decisions. This person may serve as trustee, co-trustee, or trust protector. You should discuss the appropriate role with the attorney who drafts the trust.
- A professional trustee is a business professional who will administer the funds to the person with I/DD as requested or made clear in a trust plan.
- Notify anyone who might want to leave money in their will to benefit the person with I/DD for which the special needs trust has been established. All bequests should be made to the person’s special needs trust and not in the person’s name.