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One of the hardest things you’ll ever do is leave a loved one behind. But if you have a loved one with a disability, planning for their future can be an even more significant challenge. Ensuring their financial future can keep you up at night. Adding a special needs trust in your will can help relieve some stress after you’re gone.
One way to provide for your loved one with a disability after you’re gone is to set up a Special Needs Trust (SNT). An SNT is a trust designed to hold assets for the benefit of someone with a disability without jeopardizing their eligibility for government benefits like Social Security or Medicaid. The money you leave in a special needs trust will be managed by a trustee and will not be considered part of your loved one’s assets. Government programs like SSI and Medicaid will be factored separately for eligibility. A trustee cannot give money directly to your loved one, which could interfere with eligibility. A trustee can use an SNT for out-of-pocket medical expenses, dental expenses, education, transportation, and personal care. You will want to choose a responsible person to grant as the trustee; however, if you cannot come up with a good candidate, you can create a pooled trust. A pooled trust is a nonprofit organization that will pool and invests funds from multiple families. Every trust beneficiary will have a separate account, and the trustee will spend money on behalf of that beneficiary. Not every area of the country uses pooled trusts, so reach out to your lawyer to see if your state participates in pooled trusts.
You may have a loved one who would benefit from an SNT. The purpose of an SNT is to preserve eligibility for SSI and Medicaid, ensuring food, shelter, and medical care while your loved one is unable to work. SNTs benefit anyone with permanent or temporary special needs, someone who may someday have a particular need, who currently receives SSI or Medicaid but may need additional funds, or who cannot manage their finances independently. Anyone with down syndrome, specific brain damage, someone who has developed paraplegia, certain congenital disabilities, or chronic mental illness.
There are a few disadvantages of an SNT that you want to consider. First, there can be high costs when setting up an SNT with a lawyer. You can set up an SNT on your own, but weigh the pros and cons of getting legal help with the initial setup. Depending on the person’s needs, an SNT can feel very restrictive. If the person with special needs is independent, they may struggle with accessing funds, as the trustee will have the final say. Even with a properly drafted SNT, the state can recover some or all of the costs paid for care. This process is called Medicaid estate recovery. After the person has passed, Medicaid benefits can be seen as a loan that needs to be paid back. However, there is a limit that the state can recover, and restrictions that protect against the state recovering costs. Contact a professional to discuss the pros and cons of Medicaid estate recovery.
If you need legal help or want to learn more about a special needs trust, contact Rowe & Walton today.