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The Benefits of A Special Needs Trust

May 21, 2021

2 women working out a special needs trustIf you or a loved one is disabled and receiving benefits through Medicaid and Supplemental Security Income (SSI), the establishment of a special needs trust can help cover expenses that those two programs do not.

Together, Medicaid and SSI pay for food, shelter, and medical care, but little else. A special needs trust can provide funding for the rest of life’s needs while maintaining eligibility for those programs.

A special needs trust can be established using one’s own funds or by relatives or friends using their money. If you or a loved one needs the benefits of a special needs trust and you’re located in or around Boca Raton, Florida, contact me — Eric H. Light, P.A. — to steer you through the requirements of setting up such a trust. I will confer one-on-one with you and make sure your trust meets the unique needs of the individual in need.

Special Needs Trusts

& Their Qualifications

The United States Code (USC) states that “an individual shall be considered to be disabled...if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment....” The section further clarifies that the disability must have lasted — or will last — for at least 12 months, or is “expected to result in death.”

If a person meets this definition, and otherwise cannot afford to care for themselves, then Medicaid and Supplemental Security Income (SSI) become available.

Limitations of Medicaid & SSI

Generally speaking, medical care, food, and shelter are covered by Medicaid and SSI, so other living expenses must be accounted for in other ways without jeopardizing the government benefits. As an example, Medicaid does not cover all medical expenses, including some therapies, equipment, and services. Other living expenses also fall outside the purposes of public benefits, including:

  • Housekeeping, cooking

  • Computers, cell phones, television, appliances

  • Grooming, dry cleaning, clothing

  • Transportation costs

  • Yard services, home security services

  • Accountant and attorney expenses

Types of Special Needs Trusts

There are two predominant types of special needs trusts available for disabled persons to supplement their public benefits, falling under the umbrella categories of First-Party and Third-Party.

First-Party special needs trusts are also called “Self-Settled” or “Self-Funded” since they utilize money that the disabled person already has in their possession. This type of trust is especially useful when the disabled person comes into a lump sum of money through the settlement of a lawsuit or by inheritance. The money could jeopardize the person’s eligibility for Medicaid and SSI.

As a result of the enactment of the 21st Century Cures Act in 2016, disabled individuals can now establish a Self-Funded Trust without court approval, but they cannot be older than 65 years of age. The trust must also be irrevocable and must be administered by a professional trustee such as a bank. The trustee can then administer funds as needed for living expenses other than those provided by Medicaid. The trust must also contain a provision to pay back Medicaid when the beneficiary dies.

Third-Party Special Needs Trusts

Third-Party special needs trusts are established and funded by relatives or friends of the disabled, usually by parents or grandparents hoping to care for their children or grandchildren.

The special needs trust can be established as part of a will or living trust with language specifying that the funds will go to supplement public benefits and not supplant them, and that upon the death of the recipient, the funds will transfer to other recipients. This clause then avoids the Medicaid payback provision of a Self-Settled Trust.

A Third-Party trust can also be set up as a Qualifying Special Needs Trust for a disabled spouse. However, the trust must be established as part of a last will and testament — called a “testamentary trust” — and not as a stand-alone trust, according to the applicable code known as the Medicaid trust rules. Otherwise, the money will be considered assets, and Medicaid and SSI can be jeopardized.

Work with an Experienced
Special Needs Trusts Attorney

If you or a loved one is disabled and in need of a way to manage expenses without being disqualified from Medicaid or SSI benefits, a special needs trust can provide the answer. The laws governing the trusts — and Medicaid and SSI — can be complex, so the trust must be set up to meet all the applicable requirements, and afterward be administered in a way that doesn’t threaten one’s eligibility for public benefits.

I have been helping Florida residents for nearly 20 years with their estate planning needs, including trusts for every type of situation. A special needs trust can provide you and your loved ones with much-needed peace of mind by establishing a mechanism for preserving Medicaid and SSI while covering for life’s other needs at the same time.

Contact me — Eric H. Light, P.A. — with all of your estate planning needs and concerns. I will work with you to tailor a special needs trust that accomplishes all your goals. My office is in Boca Raton, and we can confer by phone or meet in person, at my office, or in your home.