Who should have a special needs trust?

If you have a special needs child, whether you are a person of means or not, you should absolutely consider setting up a Special Needs Trust. A trust is a legal document that allows one person (trustee) to hold money or other property for the benefit of another (beneficiary). Special Needs trusts do that and more. The purpose of the Special Needs Trust is to provide a source of funds to the beneficiary without disqualifying him or her from receiving Social Security (SSI) and other important government benefits which provide money for basic needs for that individual.

So who should have such a trust? Any child or adult child who is disabled and who qualifies for SSI. Who is disabled under the law and how does one qualify for SSI? The Social Security Administration sets out its requirements this way:

For Individuals 18 or Older

Under the Social Security Act you are considered disabled if you have:

…the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of at least 12 months.

Work is substantial if “it involves doing significant physical or mental activities, or a combination of both.” Gainful work activity is any of the following:

  • Work performed for pay or profit;
  • Work of a nature generally performed for pay or profit; or
  • Work intended for profit, whether or not a profit is realized.

For Individuals Under 18

You are disabled if you have:

… a medically determinable physical or mental impairment, which results in marked and severe functional limitations and that can be expected to result in death or that has lasted or can be expected to last for a continuous period of at least 12 months.

A medically determinable physical or mental impairment is one resulting from anatomical, physiological, or psychological abnormalities, which can be shown by medically acceptable clinical and laboratory diagnostic techniques.

The Social Security Administration uses a specific list of impairments to determine eligibility along with medical evidence from treating physicians.

If your child meets the definition of disabled, in order to be eligible for SSI and other government benefits, he or she can only keep a maximum of $2,000 in his or her own name. If you believe that when you pass on you can just leave your child your wealth in your will, you must understand that if you do, he or she will not be able to keep that money andbe eligible for government assistance. The only way to preserve your assets for your child’s supplemental care while still qualifying for government benefits for basic care, is to place those assets into a Special Needs Trust which may either be created during your lifetime or upon your death in your will.

It is important to talk to an attorney who specializes in Special Needs Trusts to discuss the options and what is best in the long run for the care and support of your special needs child. Protect his or her interests and secure his or her care for the future.

For more information about special needs trusts, check out the following articles: