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If the novel coronavirus pandemic has taught us anything, it is the importance of planning for the unexpected and having your ducks in a row should unexpected illness or injury occur. Estate planning, especially planning for special needs and government assistance eligibility, is more important now than ever. If you have a child or another loved one who has special needs, you can ensure that they have the income needed to cover their necessities and more without ruining their chances of securing needs-based governmental assistance such as Medicaid and Supplemental Security Income (SSI). Read on to learn about how special needs trusts can be used to support your loved ones without ruining Medicaid eligibility, and speak with a dedicated West Palm Beach Medicaid planning and elder law attorney if you have any questions.
A special needs trust (SNT) is an estate planning tool designed to help a loved one with a disability without jeopardizing their eligibility for needs-based government programs. It is a type of trust, which generally means that a party will put funds into an account that will be disbursed to or for the benefit of a beneficiary under specific circumstances. Trust beneficiaries are not responsible for managing the trust and have only limited, specified access to the funds therein. To be effective, SNTs come with a host of specific requirements, which we discuss below.
There are two general categories of special needs trusts: third-party and self-settled. Third-party trusts involve funding the trust with assets that belong to someone besides the beneficiary. For example, a parent could set up a special needs trust for a disabled child. Self-settled trusts, on the other hand, are funded with assets belonging to the beneficiary. Self-settled trusts allow a disabled person to put their own money into a trust, ensuring that they receive a continuous stream of income that is not counted against their Medicaid eligibility.
Medicaid has very strict guidelines for eligibility. If an applicant has a certain level of assets, or if they have too much discretionary income, they will lose eligibility. Special needs trusts restrict the beneficiary’s access to the trust assets such that they are not considered legally available to the beneficiary. SNTs can disburse funds for the benefit of disabled individuals without that income counting against their Medicaid eligibility. The SNT benefits can be used to pay for items beyond necessities such as education, leisure activities such as books, music, movies, and other forms of entertainment, and even vacations.
In order to be effective and supplement, rather than replace, government benefits, your special needs trust must be properly drafted. State laws differ, but generally special needs trusts must follow these guidelines:
● Generally, SNTs must be set up by a parent, grandparent, legal guardian, or a court
● SNTs may be created as part of a will or other trust to go into effect when the creator dies, or during the creator’s lifetime
● The beneficiary must not have direct access to the fund or the ability to revoke the trust
● The beneficiary must be “permanently and totally disabled.” Requirements differ between adults and children.
● The trustee must not be able to make payments or distributions that could interfere with assistance eligibility. Distributions do not go directly to the beneficiary.
A Medicaid planning attorney at Shalloway & Shalloway can help protect your family, creating an estate and special needs plan tailored to your needs and circumstances. We will evaluate your circumstances and those of your family to determine the best type of will, trust, and other legal documents and mechanisms available to benefit your family the most. Contact the passionate and detail-oriented West Palm Beach estate planning attorneys at Shalloway & Shalloway at 561-686-6200.