Special Needs Trust – What is it?

A special needs trust is made specifically to a person with special needs. They manage assets and property for that person’s benefit. Simultaneously, they don’t compromising access to important government benefits.

Special needs trusts supplement any government benefits the person with special needs may receive. A properly drafted special needs trust will allow the beneficiary to receive government benefits while still receiving funds from the trust. First it is important to understand how a typical trust works.

How do trusts work?
A trust is a relationship between three parties — a donor, who supplies the funds for the trust; a trustee, who agrees to hold and administer the funds according to the donor’s wishes; and a beneficiary or beneficiaries who receive the benefit of the funds. Often, the document spells out the donor’s wishes. This gives the trustee instructions about how he or she should use the trust’s assets.

Trusts have been used for estate planning for a significant amount of time. As such, they are highly useful tools for ensuring that a donor’s property is administered as he or she desires. One of the most popular reasons trusts are so popular is that they usually survive the death of the donor. Trusts are a low-cost way to manage the donor’s assets for others.

How a Special Needs Trust Can Help
Receiving money from a trust has the potential to cause a loss in eligibility in government assistance. Creating a special needs trust (also called a supplemental needs trust) is a way around losing eligibility for SSI or Medicaid. Then, instead of leaving property directly to your loved one, you leave it to the trust.

With a trust, you also choose someone to serve as trustee. The trustee will have complete discretion over the trust property. As such, they will be in charge of spending money on your loved one’s behalf. Because your loved one will have no control over the money, SSI and Medicaid administrators can ignore the trust property for program eligibility purposes. Trusts commonly end at the beneficiary’s death or when the trust funds have all been spent. For more detailed information about government eligibility and trusts, please contact us for a consultation.

How Trust Funds Can Be Spent
The trustee cannot give money directly to your loved one — that could interfere with eligibility for SSI and Medicaid. However, the trustee can spend trust assets to buy a wide variety of goods and services for your loved one. You can spend special needs trust funds to pay for personal care attendants, home furnishings, out-of-pocket medical and dental expenses, education, recreation, vehicles, and physical rehabilitation. To better understand how trust funds can be spent, contact an estate planning attorney in Toledo.

What Is A Pooled Trust?
If you can’t think of a good candidate to serve as a trustee or are leaving a relatively modest sum and don’t want to set up a separate special needs trust, consider a “pooled trust.” These are special needs trusts run by nonprofit organizations that pool and invest funds from many families. Each trust beneficiary has a separate account, and the trustee chosen by the nonprofit spends money on behalf of each beneficiary. Pooled trusts (also called community trusts) are available in many areas of the country. 

Who should set up a Special Needs Trust?
Due to the complexities of setting up a Special Needs Trust, we highly recommend speaking with a professional. Contact us for a consultation from a professional estate planning lawyer in Toledo.