Special Needs Trusts are one planning tool for both children and adults with disabilities.
- Raising a family member with special needs involves unique medical, financial, social, and legal issues.
- Maintaining eligibility for government assistance programs while providing that your special needs family member is well-cared for requires specific planning.
- Specific planning is required to maintain eligibility for government assistance programs, such as Supplemental Security Income (SSI) and Medicaid, while providing that your family member is well cared for into his or her adult or advanced years.
These specialized trusts are designed to provide supplemental goods and services above the levels of those provided by Medicaid, but without running afoul of the resource and income limit rules for SSI and Medicaid eligibility. They can dramatically improve the quality of life of your loved one, or for yourself, if you meet the SSI definition of “disabled.”
There are three basic forms of Special Needs Trusts:
The first type is a trust funded with the disabled person’s own assets, such as a direct inheritance, gift, or personal injury recovery. The trust can be created by either the disabled individual him/herself, or by a family member of that individual.
A second form of special needs trust is funded with the assets of people other than the disabled individual. The trust can be set up either through a family member’s will, or during the lifetime of a family member, thus allowing others to make gifts to the disabled individual through the trust.
Finally, pooled special needs trusts are offered by some non-profit organizations formed to support disabled individuals with particular diagnoses.
The Association for Retarded Citizens, or ARC, administers a master pooled trust for the benefit of its members.
In pooled trusts, the disabled individual’s own money is transferred into the ARC master fund, and a separate account is established in the disabled individual’s name. The balance of that account, just like other Special Needs Trusts, is disregarded for purposes of SSI and Medicaid eligibility, and is administered by the non-profit’s designated trustee.
Another planning tool for individuals with disabilities is the ABLE Account, named after the Achieving a Better Life Experience Act of 2014. ABLE accounts also provide asset protection while qualifying for government benefits. However, in contrast to Special Needs Trusts, they allow the special needs beneficiary autonomy and control of the funds in the account. The beneficiary can make investment decisions, direct distributions, or make cash withdrawals. Provided the funds are spent on Qualified Disability Expenses, the earnings on the money withdrawn from the account are free of federal income tax.
There are strict requirements for qualification as a Special Needs Trust or for opening an ABLE account, as well as restrictions on what distributions may be made from these trusts and accounts without jeopardizing government benefits. Kendra Rey of Hammerle Finley Law Firm is well versed in special needs planning, and Rob Morris can assist you in all stages of Medicaid qualification.
If you have a family member with special needs, contact the Hammerle Finley Law Firm to discuss your individual situation.Caring for a family member with special needs involves unique medical, financial, social, and legal issues.