Special Needs Trusts: Eligibility for Federal & State Assistance
If you have a child with special needs, you want to be sure that once you are gone, he or she will be well taken care of. Special needs individuals under the age of 65 are eligible for Medicaid, Supplemental Security Income (SSI) and other benefit programs as long as they do not have more than $2,000 in their own name.
The Trouble with Gifts Outside of a Trust
The trouble is that parents and well-meaning relatives and friends may give money to your child, either now or in their wills, and this could make the child ineligible for some benefits, creating the need to spend down the money and re-apply for the benefits. Some parents try to solve this problem by disinheriting their child and giving the money to a sibling or family member who promises to care for the child, a solution that puts enormous stress on the sibling or family member and doesn't guarantee that the child's needs will be met.
The Benefits of a Special Needs Trust
Your best bet is to open a special needs trust. This is a living trust that is created for a person who, because of physical or mental disability, is receiving federal and state government benefits for medical care and daily living needs, such as SSI, Medicaid, vocational rehabilitation, subsidized housing and others. The purpose of the special needs trust is to provide a source of funds without disqualifying the beneficiary from receiving those government benefits. The money in their own name stays at the $2,000 or below level, they receive their government benefits to pay for their basic care, and they have the advantage of getting additional money from the trust at the trustee's discretion, to pay for care over and above the basics, without endangering their eligibility for government entitlements.
How a Special Needs Trust Works
This trust may be created in your will and acts as a receptacle for money earmarked for the child. All money that is left to your child at any time will go into this trust, even if it is a gift or bequest from another family member or a friend. It can improve the quality of life for a disabled child or adult tremendously. Typically, special needs trusts are designed so that none of the money can be used for food, clothing and shelter, because these are all services provided by the government programs, but the money may be used for amenities government programs don't provide, such as travel, entertainment and recreation.
Your child will live a better life and continue being eligible for government programs. If you have a disabled child, do consider adding a special needs trust to your estate plan. Discuss it with an attorney who has experience creating this specific type of trust.
For more information about special needs trusts, check out the following articles:
- Special Needs Trust Overview
- Types of Special Needs Trusts and Who Can Set Them Up
- Who Should Have a Special Needs Trust
- How to Create a Special Needs Trust and What to Include In It
- How to Fund a Special Needs Trust and How the Money May Be Spent