Government benefits are extremely helpful for individuals with mental or physical disabilities. However, eligibility can easily be lost if the individual receives inheritances or financial support from other places.
As Florida estate planning lawyers, we’ve made an easy-to-understand guide to all things special needs trusts.
What Are Special Needs Trusts?
Special needs trusts are legal structures used in estate planning to help disabled or chronically ill people to receive a financial inheritance, while still retaining their eligibility for government benefits such as Social security, Supplemental Security Income (SSI) and Medicaid.
These types of trusts are very useful and can be created with the help of an estate planning attorney.
There are various types of special needs trusts, including:
- Third-party special needs trusts: (Funded with assets by someone other than the beneficiary).
- Self-settled trusts: Funded by the beneficiary’s assets
Special needs trusts may also be referred to as ‘Supplemental Needs Trusts’.
Read related: A Guide to Different Types of Trusts in Estate Planning
Ways Special Needs Trusts Can Protect Benefits Eligibility
For Medicaid Eligibility
Disabled individuals needing financial support can qualify for Medicaid benefits if their monthly income and asset value exceed the required limit (around $2,000).
If the assets you wish to leave to your disabled child impact their Medicaid eligibility, a special needs trust can be a great workaround. The trust will take legal ownership of the assets, making them uncountable to your child – while your child still retains access to the assets and their funds.
For Supplemental Security Income (SSI)
Similarly, if a disabled person receives an inheritance, they may lose their eligibility for SSI benefits that can be used for housing and food as this is needs-based.
If the individual becomes a beneficiary of a special needs trust, however, they can benefit from the trust’s assets without it impacting their SSI eligibility.
For Further Care and Services
One of the most common ways people use special needs trusts is for additional care and services without impacting Medicaid benefits.
While Medicaid covers a lot of special needs-related costs, such as hospital bills and long-term care, it also overlooks a wide range of expenses, such as rehab services, transportation, equipment and vacations.
If you can retain the benefits eligibility, you may be able to utilize your family’s personal funds in these areas to provide a better quality of life.
However, you must confirm that trust assets are not legally considerable available to the beneficiary – by proving that the trustee and not the beneficiary controls the distribution of trust income and assets.
The beneficiary should have no control of the trust and all goods and services purchased on their behalf but be made by the trustee.
Please contact our estate planning attorneys to understand what is possible for your loved one.
Can I Make a Special Needs Trust?
Special needs trusts that are used to support your loved one in addition to government benefits must be created properly and under Florida and federal laws. The following requirements must be met:
- It must be set up by a parent, grandparent, legal guardian or court.
- The person with special needs cannot be the trust creator, even if their assets fund the trust.
- Funds must not be directly available to the beneficiary (but can be spent on their behalf by the trustee).
- The beneficiary cannot revoke or make demands from the trust.
- The trustee may not be allowed to make payments or distributions that interfere with government benefit eligibility.
- Distributions cannot be made directly to the beneficiary.
How to Fund a Special Needs Trust
Special needs trusts can be funded at any point but are often not funded until the creator or parent has passed away. For example, a parent may set up a special needs trust, so part of their estate goes to the trust rather than directly to their disabled child.
You should contact an estate planning attorney to understand how to fund a special needs trust in detail.
Special needs trusts are typically funded using:
- Life insurance policies
- Cash and cash gifts
- Investments
- Retirement plan benefits
- Real estate and personal property
- Personal injury settlements
When Does a Special Needs Trust End?
Special needs trusts end when the beneficiary passes away, and any remaining beneficiary receives the remaining trust assets and funds. This may include the state’s Medicaid division for reimbursements.
Special Needs Trust in Further Detail
Select a Trustee
Trustees are individuals or institutions selected to administer and manage trusts in the best interest of the beneficiaries. In the case of special needs trusts, it must be someone who is responsible for spending on behalf of the disabled individual, such as a close family member.
Letters of Intent
Special needs trust creators may also want to draft a letter of intent. These letters can describe how your child should be cared for after you pass away.
It is not a trust document nor a legal document, but it can be vital in helping surviving loved ones and guardians in the role of caregivers or trustees. For example, it will help them recognize their medical needs, daily routines, likes, dislikes and advice for spending.
Do I Need to Work with an Attorney?
Creating a special needs trust is complex and requires you to meet various laws to avoid breaking any and avoid your child becoming ineligible for public benefits.
It’s highly recommended that you contact an experienced estate planning lawyer, especially those with experience in areas such as family trusts. They will help you navigate the complexities and set up a trust optimal for your loved one and family in the long term.
Hire an Elder Law Attorney in St Petersburg, FL
If your loved one needs financial support without their benefits eligibility being affected, then our Florida estate planning attorneys can help. From ensuring benefit eligibility to creating life-long supporting trusts, we can take care of the complicated work.
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Battaglia, Ross, Dicus & McQuaid, P.A. is U.S. News and World Reports Tier 1 law firm in Florida, specializing in Estate Planning & Probate since 1958. With award-winning, experienced estate planning attorneys, they can help you plan for the future today.
