Special Needs Trusts in a Nutshell
Liz Seeley
Special Needs Trusts are established so that a disabled person who is supported by public assistance programs (such as Medicaid, Social Security Disability Income or Supplemental Security Income) can be provided with "extras" which are unavailable under public benefit programs, without reducing or otherwise affecting the disabled person's eligibility for public assistance.
The income and principal of Special Needs Trusts can supply books, magazines, clothing, bus passes, hobby supplies, trips to movies, plays and sporting events, as well as payment for dental costs, a cell or telephone, a wheelchair, special care, and other items otherwise unaffordable to the disabled person (and not provided by the assistance program).
Assets placed into a Special Needs Trust are managed by a Trustee, providing protection for the beneficiary who often cannot manage his or her own financial affairs. If a third party sets up a Special Needs Trust then the assets which remain in that Trust can be passed to a remainder beneficiary upon the death of the disabled person. In a situation where the creator of the Trust for a Special Needs beneficiary needs to address estate taxes as a factor in his or her estate planning then a Special Needs Trust can be established in a way which will remove the assets in the Trust from the creator's estate.
A parent or other third party can set up a Special Needs Trust for a disabled beneficiary in a Will or in a seperate trust instrument. Other persons can make gifts to the trust. In such third party created trusts there are two key provisions:
1. The Trustee must have complete discretion as to making distributions for the beneficiary-the beneficiary has no right to demand distributions•Upon the death of the beneficiary the remaining assets can pass to another beneficiary-there would be no requirement to reimburse Medicaid
2. The third party can establish either a revocable or irrevocable trust. For example, to preserve flexibility, a parent might wish to establish a revocable trust which becomes irrevocable upon his or her death. Upon death, the parent's will can pour-over additional assets into the trust. Using an irrevocable trust would enable the parent to save estate taxes on trust principal.
A Special Needs Trust can also be established by the guardians or conservators of a disabled person with the disabled person’s assets. This requires probate court authorization and is often used to hold settlements received after an accident.
The Special Needs Trust can be tailored to meet the particular needs of those caring for a disabled person, enabling them to maximize the help they can provide to their loved ones.
Please contact Liz Seeley for more information about Special Needs Trusts
Email: ecs@seeleyberglass.com Phone: (203) 256-3250
