Special Needs Trusts
Special Needs Trusts are funding vehicles that allow individuals to stay qualified for Medicaid, Social Security Income, and other medically need programs. There are many advantages to establish a Special Needs Trust for purposes of reducing countable assets in order to qualify for SSI, but more importantly for the Medicaid benefits that come with that qualification. Assets in these trusts cannot be used for certain things without a penalty – food and shelter are excluded uses.
“If you have a loved one who has special needs, or who may become qualified for some sort of benefits, there’s a bunch of different types of Medicaid programs they might be qualified for. You may want to consider not leaving them assets outright in your will. Consider a Special Needs Trust.”
- Self-settled Trust or Disability Trusts: You must be under 65 years old to establish this trust and the beneficiary must be disabled. The trust is funded with the beneficiary’s own money/assets and it can be established by self, a parent, grandparent, legal guardian or the court. The assets cannot be used for food or shelter without penalty or reduction of social security of benefits. Upon the beneficiary’s death, the trust must provide repayment of Medicaid assistance (Medicaid lien) paid on behalf of the beneficiary from any remaining assets in the trust. These trusts are irrevocable.
- Third Party Special Needs Trusts: These are created by a parent or other person with the third party’s assets (not with assets of the Beneficiary). Third Party Trusts are created by another for the benefit of a disabled family member (not a spouse). They can be established during the grantor’s lifetime, at their death (testamentary trust), or through an intervivos gift. The Beneficiary cannot have the authority to control assets. There is no requirement to repay Medicaid, but it is still a supplemental trust (no food or shelter without a penalty or reduction in social security benefits). The Trust maker can designate who inherits the funds upon the death of the beneficiary.
- Pooled Trusts: This is a trust that is managed by a non-profit organization for a group of disabled individuals. The organization pools the funds of the disabled individuals. Each disabled individual joins the trust through a Joinder Agreement and an account is established for each individual. These types of trust can be a cost-effective tool to preserve eligibility for Supplemental Security Income (SSI) and Medicaid.