If you intend to leave assets to a loved one with special needs, his or her eligibility for government benefits could be put at risk in the absence of proper planning.
For example, instead of leaving a cash gift that would result in disqualification for government benefits, you can set up a special needs trust. This kind of trust can benefit your loved one while also ensuring his or her eligibility for Medicaid and Supplementary Security Income (SSI).
How a Special Needs Trust Works
With a special needs trust, you don’t leave assets directly to your loved one; instead, you leave the assets to the trust.
Someone you appoint to serve as trustee will then have discretion to spend the money on your loved one’s behalf. Special needs trust funds can be used in a variety of ways, including to pay for your loved one’s out-of-pocket medical expenses, personal care, recreation, physical rehabilitation, vacations, home furnishings and education.
Because your loved one has no control over the assets, the trust property is not considered for the purposes of Medicaid and SSI eligibility.
Note: the trustee should avoid distributing assets directly to the beneficiary, as this could jeopardize eligibility for government benefits.
Typically, a special needs trust ends when all of the funds have been spent or when the trust is no longer needed.
Learn more about your trust options.
A trust can be an excellent estate planning tool, and many different kinds of trusts exist to achieve specific goals. To learn more about your trust options — and about trust administration — please see the Johnson Hobbs Squires LLP firm’s overview of trust creation services.