If you’re a parent of a special needs child, you already understand the importance of being prepared. From birth until adulthood, both you and your child will face unique challenges that are unlike those experienced by any other family. A special needs trust can prove to be a valuable tool in managing those situations. This legal instrument allows the parent to ensure that the financial and health-related needs of the child will be met in a way that doesn’t jeopardize the support provided by government assistance. It’s one of several ways that the Estates & Trusts team at SederLaw helps families plan for the future.
What Is A Special Needs Trust (SNT)?
This is a trust that is designed to provide financial support to a special needs child (the beneficiary) without compromising his or her eligibility for certain public assistance programs. Generally, government benefits such as MassHealth (Medicaid) and Supplemental Security Income (SSI) are needs-based, meaning the amount of income or assets a person has can affect his or her eligibility for the program. To avoid this problem, the assets held in the special needs trust, or SNT, are not considered to be the beneficiary’s property.
The SNT acts as a separate legal entity that holds and distributes assets for the benefit of the special needs child. The money can be used to purchase food, pay for shelter, and cover related expenses. Meanwhile, the child is still able to receive benefits such as those mentioned above. The trust funds can pay for certain items that might not be provided by government programs.
What Does the SNT Pay For?
The SNT is sometimes called a supplemental needs trust, which describes well the purposes for which this instrument is usually created. The trustee distributes assets according to the SNT and applicable laws. The child’s parents can be the trustees of the SNT and can even name a successor trustee in the event they die before the child does. The government pays for certain fundamental needs by way of MassHealth and other programs. But funds held in the SNT can then be used to pay for:
- Travel, vacations, and recreational camps
- Social outings such as movies
- Restaurant meals
- Quality of life items such as cosmetics
- Legal fees
- Medical needs not covered by public assistance
In effect, the child can qualify for public assistance while having the financial security and quality of life afforded by the SNT.
What Are the Different Types of SNTs?
Two main types of special needs trusts exist to accomplish the above goals:
Self-Settled Special Needs Trust. Also called a first-party SNT or (D)(4)(A) trust (based on where it is located in the US Code), this type of trust is usually funded by a personal injury settlement or an inheritance that the beneficiary directly receives. The beneficiary’s assets are preserved so he or she doesn’t have to spend away everything to qualify for public assistance.
Under federal law, there are certain requirements that must be met so that funds held in this type of SNT do not count for purposes of program eligibility. Those requirements include:
- At the time the SNT is created and funded, the trust beneficiary must be under the age of 65
- The trust has to be irrevocable (cannot be terminated or altered)
- The trust must include terms that Medicaid will be reimbursed upon the death of the beneficiary
- The trust has to be administered for the sole benefit of the beneficiary
Third-Party Settled Trust. This type of SNT is funded by someone other than the individual with the special needs condition or disability. No assets belonging to the beneficiary can be used to fund this trust. Permitted sources of funds include:
- An inheritance from a parent or grandparent
- Life insurance proceeds
Unlike the Self-Settled SNT, this type of trust requires no provisions to repay Medicaid. Instead, the person who establishes the trust has the right to determine how the trust estate will be distributed upon the beneficiary’s death.
How An Estates & Trusts Attorney Can Help
A knowledgeable lawyer can explain the advantages of the SNT, discuss how the trust works, and help you establish one that is customized for the exact needs of your child. We understand the legal criteria that have to be met in terms of establishing, funding, and distributing assets from the special needs trust.
As part of our work, we will review the government programs (state and federal) that your child either currently receives or for which he or she may qualify. We can evaluate how these benefits work and use that information to develop a special needs trust that won’t compromise the ability of your child to receive them. We can also assist you with the process of selecting a trustee for the SNT. Being a trustee is a significant duty, but we can explain what the law requires of the individual(s) you choose to serve in this capacity.
Contact Our Worcester Special Needs Trust Attorney
Finally, we can talk with you about other options for caring for your special needs child, such as guardianships and ABLE accounts. That’s level of comprehensive legal service you can count on from SederLaw. To get started today, connect with our Estates & Trusts team.