As you get older, you may be aware that your adult child who is disabled or unable to work and receives SSI or Medicaid benefits, may never be able to take care of him/herself. A concerned parent should be aware that there are ways to protect that disabled child for his/her lifetime and not endanger the child’s government benefits. The best way is to create a SPECIAL NEEDS TRUST.
A Special Needs Trust (SNT) can be created from the child’s own money – such as an inheritance, an insurance payout, or a personal injury settlement — or the money of a third party. This trust created from the individual’s own funds is more expensive because it must be approved by the court. The easiest and least expensive SNT to make is when a parent or grandparent or other third party pays for the trust and contributes a sum of money for the benefit of the disabled person, who is known as the beneficiary.
One of my clients had a brother who, at 45, was unable to hold a job due to severe COPD. The brother received SSI and Medi-Cal but had very little money for anything beyond basic necessities. The sister wanted to contribute $100,000 for her brother’s lifetime special needs. She paid for the trust and named her other brother as trustee. The trustee set up a bank account in the name of the trust and used the funds to pay for disabled brother’s needs, above and beyond his room and board, which are the only things covered by government benefits.
WHAT ARE THE ADVANTAGES OF A SPECIAL NEEDS TRUST?
· An SNT ensures that a disabled person with assets over $2000 will still qualify to receive SSI, Medi-Cal and other government assistance necessary for their health and well-being.
· An SNT gives peace of mind to parents that their disabled child will be taken care of when they are no longer physically able to provide the care.
WHAT ARE THE DISADVANTAGES OF A SPECIAL NEEDS TRUST?
· A diligent trustee must be appointed who must handle all the money in the trust. The trustee’s job and could last a long time – for the entire lifetime of the disabled person.
· The beneficiary may never receive cash from the trust – only items for his/her special needs, such as medical and dental expenses, medical equipment, training and education, insurance, transportation, entertainment, even vacations, automobiles, real property, modifications to accommodate the disability and other items to improve the quality of life. The trustee pays for everything and the beneficiary receives what the trust has paid for.
· Most disabled persons want to handle their own money and must be convinced that this would disqualify them from receiving government benefits.
· Special care must be taken about distributions if the beneficiary is on Section 8 housing.
I f you have a child who will need outside assistance for the rest of his or her life, see an attorney sooner rather than later to discuss the possibilities of setting up a Special Needs Trust. You’ll sleep a lot better once the action has been taken.