A person who wants to provide for a child with a disability who receives or is eligible for government benefits may establish a special needs trust. Special needs trusts provide money that supplements, but does not replace, government services that are available for the disabled person.
When a special needs trust is created, the person who receives the beneficiary’s benefit checks, must disclose the existence of the trust to the Social Security Administration and state department of health services. A special needs trust needs its own taxpayer ID number and must file an annual trust tax return.
A special needs trust must be carefully drafted to provide for the beneficiary without jeopardizing public benefits. A person 18 or older with a disability who has less than about $2,000 in the bank (adjusted annually for inflation) is eligible to receive significant benefits through Supplemental Security Income (SSI) from the federal government and Medicaid from the state. Those benefits provide money for the person’s food, clothing, shelter, and most medical coverage, including nursing home care. If the disabled person cannot get a job that provides health insurance, Medicaid can be essential.
However, if there is no special needs trust, a person who receives an inheritance will be ineligible for government programs until the inheritance has all been spent.
While the government programs provide benefits to cover most food, clothing, shelter, and medical needs, they do not provide any extra money to help a person enjoy life. Special needs trusts can fill this important gap by paying for things such as for special therapy and equipment, vacations and travel, sporting equipment, movie or theater tickets, a TV, or dental or other medical care that is not covered by Medicaid.
Normally, a special needs trust provides that the parent of the disabled child, the trustee, can pay only for expenses that supplement what government programs provide. The payments cannot be in a form that could be easily converted to cash or be used to provide for the beneficiary’s basic needs such as food or housing, items that should be covered by government benefits.
Contact Norbert U. Frost, an experienced estate planning attorney, to establish a special needs trust and get specific directions on the administration of the trust.
Call (707) 553-7356 or fill out the form on our Contact page to schedule your consultation.