What is a Special Needs Trust?

A trust is an arrangement where assets (money or other property) is held by one person, for the benefit of another.  The person holding the property is called the “trustee”, because he is trusted with holding the property, and using it wisely and correctly.

A Special Needs Trust (“SNT”) is a special type of trust where the beneficiary is a disabled person, and would be eligible for Supplemental Security Income if they didn’t have (or were about to have) so much property.  Currently, owning more than $2,000 in countable assets will prevent an individual from obtaining SSI.

Money held in a SNT is used to cover expenses other than food or shelter that SSI and Medicaid will not pay.  Because the funds in the trust cannot be used for housing or food, the Social Security Administration will not count the funds as part of the disabled person’s assets.

The advantage of these trusts is a family member can often act as the trustee and can use the funds held in the trust to benefit the disabled individual without needing approval or supervision by a third party (like a court).  Also, the trust can be funded by many sources (life insurance, inheritance, gifts) easily, giving the family a way to transfer property to the disabled individual without fear of disqualifying them from government benefits.

However, the trust document must be properly written in order to preserve the SSI and Medicaid benefits.  There are actually 3 different types of trusts, and improper drafting of the documents or use of the trust funds may cause the beneficiary to lose their benefits or incur severe financial penalties.  The trustee will also have to stay informed of the SSI and Medicaid rules concerning how the trust funds may be used.

For these reasons, it’s best to get the help of a lawyer when setting up and maintaining one of these trusts.  I can help you establish and maintain a Special Needs Trust in order to protect the assets of your child, and help them maintain Medicaid coverage.  Feel free to email me for more information or call me at (615) 627-0030 to schedule an appointment.