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What is a Special Needs Trust?

Estate Planners | Monday, March 28th, 2011

The special needs trust, which is sometimes referred to by the term ‘supplement needs trust’ is a trust that is designed to benefit a disabled child after your death. This trust involves the appointment of a trustee who will hold property for the child’s benefit. The special needs trust can provide for the child’s needs without legally disqualifying the child from receiving the benefit of government programs like Social Security, Supplement Security Income, or Medicaid.

How the Special Needs Trust Effects Benefits

A disabled adult, under Social Security Administration rules, cannot be the owner of more than $2,000 in assets, exclusive of a home and a car, and still qualify for benefits under the Supplemental Security Income or SSI program. Being eligible for SSI is very beneficial for a disabled person as it also makes the person eligible for other benefit programs, like food stamps, and Medicaid, a program that pays for medical expenses, mental health services, and nursing home care. Being eligible for Medicaid also makes the disabled person eligible for a sundry of other community services that they might otherwise not qualify for. These benefits can enhance the disabled person’s quality of life. The special needs trust makes it possible for you to bequeath property or assets to a disabled child while not affecting the child’s eligibility for these valuable programs.

A Viable Alternative

While it often seems that the best course of action is to leave a particular amount of money to an immediate family member and trust that they will spend the money on the child, this line of thinking doesn’t always work. The money is then subject to judgments against that relative, or to the relative’s creditors or jeopardized during a divorce proceeding. The money could also be lost in bankruptcy. There is no way to legally force a relative to spend the money on the disabled child by simply leaving it to a relative who has promised to do as you wish with the money. And should the relative die before the disabled child, the money that you left for the child might be given to the relative’s heirs! For this reason, it is invariably a better alternative to establish a special needs trust for the child.

How the Child Can Use the Trust

A special needs trust will help you to avoid all of the problems discussed above. While the child’s monthly SSI or Social Security benefits can be used for the child’s basic needs, like shelter, food, and clothing. The money from the special needs trust can be used for other things that will enrich the child’s life, such as things for the child’s health, education, or well-being, like education, computer equipment, and so on. Trust money can also be used to pay for medical treatment that is not covered by the child’s Medicaid, such as orthodontic treatment.

To learn more about special needs trusts and how they may be a good option for your special needs or disabled child, talk to an estate planner in your area.

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