What is a Special Needs Trust?
Establishing a special needs trust can provide security for a loved one with a disability. If the loved one is receiving benefits from a government program, these trusts can supplement them while allowing beneficiaries to receive trust assets.
Choosing a responsible trustee is important for special needs trusts, since this person will have authority to use the funds as they see fit. Giving this control to the trustee protects the beneficiary from having their Medicaid or social security benefits affected by the trust funds.
Seniors can benefit from special needs trusts, especially if they have disabled spouses, children, or grandchildren. These trusts are also useful with helping to qualify for long term care through Medicaid.
First and Third Party Special Needs Trusts
There are different types of special needs trusts. A first party special needs trust can apply to the loved one’s personal accident settlements and inheritances. When the beneficiary dies, any remaining assets must be used to pay the government back for medical costs.
Third party special needs trusts are the most commonly used by family members. These trusts can cover all types of assets owned by another person, including investments and property. The difference is that when the beneficiary passes away, the remaining assets do not have to be used to pay back the government; they can be distributed to charity or family members.
Pooled Special Needs Trusts
Another option is a pooled trust, which may be more cost-effective. These are set up by non-profit organizations, with smaller accounts set up within a larger trust. The special needs beneficiaries are grouped together, and the trust monies can be invested and managed by a trustee. These are also referred to as community trusts and can be a good choice if a trustee cannot be found.
How Special Needs Trusts Work
Trustees are not permitted to give trust money to the beneficiary, as doing so could affect SSI and Medicaid eligibility. The funds can be used for things like medical and dental costs, education, recreation and vacations, caregivers, furniture, and cars, provided they follow the trust’s terms. It is important to understand what the money can be used for, since certain items may decrease SSI benefits. For example, disbursements for shelter and food may be considered as income for the beneficiary.
Setting Up a Special Needs Trust
Deciding which kind of special needs trusts to set up will depend on many factors, including the type of special needs the beneficiary has, as well as the amount and type of assets and long-term care concerns.
These trusts need to be worded specifically, which can be challenging for the inexperienced. Some of the main components include a statement that the trust will be used for “supplemental and extra care” in addition to government benefits. It should also make mention that it is not to be used for a basic support trust, and can include information about later Medicaid reimbursement, if applicable.
Brooklyn Elder Care Lawyers at Korsinsky & Klein, LLP Understand Special Needs Trusts
Setting up a trust can help protect your family’s assets. Call a knowledgeable Brooklyn elder law lawyer at Korsinsky & Klein, LLP for all of your estate planning needs. Reach us at 212-495-8133 or complete an online form. With offices in Brooklyn, New York, and Lakewood, New Jersey, we serve families in Manhattan, Long Island, and Westchester, New York.