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Special needs trusts (SNTs) can be extremely useful tools to provide supplemental income to an individual who needs special care but lacks the funds to pay for it. With proper utilization of an SNT, an individual can receive disbursements from the trust without affecting their eligibility for Supplemental Security Income (SSI), Medicaid, and other needs-based governmental programs. SNTs must be well-crafted to be effective and not carry unintended consequences. There are both advantages and drawbacks to their usage.
Continue reading for a discussion of the advantages and disadvantages of special needs trusts in Florida. If you are considering whether to establish an SNT for yourself or a loved one, call an experienced West Palm Beach special needs trust attorney for advice and assistance.
The principal purpose of a special needs trust is to grant supplemental income to a person with special needs without affecting the beneficiary’s eligibility for SSI, Medicaid, and other government programs. The settlor can set up the trust to disburse funds for a family member or other loved one with a disability, allowing trust funds to give the beneficiary an easier and more pleasant life. These disbursements, if utilized properly, will not affect whether or how much SSI the beneficiary can receive or whether they qualify for other programs.
Special needs trust funds can be used to pay for a wide range of non-essential items, including but not limited to:
Essentially, special needs trust funds can be used to pay for anything that is not an essential life good (food, water, electricity, rent, gas, mortgage, property taxes, etc.). If trust funds are used to pay for any of these essential items, the SSA will treat those payments as “in-kind support and maintenance” (ISM), which will be counted against the beneficiary in calculating their SSI award and eligibility for other programs.
In addition to the principal use of SNTs, they provide several additional benefits. SNT funds are tax-deductible, keeping more money in the family. Moreover, because the trust assets are technically owned by the trust and not by the settlor or the beneficiary, those funds are not available to creditors or attachable for paying judgments. The money can only be used to provide for the person with a disability.
Special needs trusts can be extremely helpful to offer supplementary income to people with special needs without affecting their ability to qualify for SSI, Medicare, and other needs-based programs. These trusts do come with certain drawbacks.
Creating an SNT is not free. The trust must be maintained, and yearly management costs can be high. Depending on who manages the fund, there may be a minimum amount required to set up the trust. It may be financially difficult for the settlor to actually establish the trust, depending upon their circumstances.
Beneficiaries may also object to the nature of the trust. The funds belong to the trust, not to the beneficiary. The beneficiary does not have the right to pull out funds and use them as they see fit. Instead, the beneficiary must request funds from the trustee, who will then evaluate whether the request is appropriate and serves the purpose of the trust. SNTs thus come with a certain lack of independence that some people may find grating.
SNTs can also trigger a Medicaid payback. When the trust ends, either because the beneficiary dies or the trust is legally terminated, Medicaid may demand payback for amounts used to provide care for the beneficiary. Ultimately, Medicaid may take all the funds that remain in the trust upon its conclusion.
Ultimately, whether an SNT is right for you and/or your loved one depends upon your circumstances, your needs, and your desires. Talk to a seasoned special needs trust and Medicaid planning attorney to discuss your options and whether an SNT is optimal for your situation.
A Medicaid planning and special needs trust attorney at Shalloway & Shalloway can help protect your family, creating an estate and special needs plan suited for the needs and circumstances of your family. We will evaluate your situation to determine the best type of will, trust, or other legal tools that will benefit your family the most. Contact the diligent and thorough West Palm Beach estate planning attorneys at Shalloway & Shalloway at 561-686-6200.