Special Needs Trusts-Basics
A Special Needs Trust is a legally binding document which enables a beneficiary with a disability to have a better quality of life yet still qualify for important government benefits.
As adults, it may be difficult for someone with a challenging disability to maintain employment on a regular basis. These individuals may need to rely on SSI (a monthly cash benefit) and Medicaid (a healthcare benefit) as they will be unable to get income or healthcare coverage without employment. Both SSI and Medicaid have strict limits on the amount of resources an individual can have in their name.
Protection of SSI and Medicaid is also important for children. Even if a child is not on SSI, they may already be receiving Medicaid benefits in the form of a Medicaid waiver, such as the Katie Beckett. Many parents do not realize that their child is receiving Medicaid as the program may be named differently in your state.
What is the maximum amount of countable resources that a person with a disability can own and still qualify for SSI and Medicaid?
$2,000 for an individual.
In a properly drafted Special Needs Trust, assets contained in the Trust are not considered countable assets for the purposes of qualifying for certain government benefits, such as SSI and Medicaid. This would allow the disabled child or adult to continue receiving government benefits and have a better quality of life.
A Supplemental Needs Trust is another name for a Special Needs Trust. A special needs trusts “supplements” the needs of the individual beyond the benefits the government provides.
There is no minimum or maximum amount that can be added to a SNT. The cost of establishing a trust should be taken into consideration for very small amounts. A trust can be created at any time even if the intention is to not fund until the future (such as through a parent’s will or life insurance policy). The trust would just be on stand-by until it is funded.
Third Party SNTs are funded by someone other than the disabled beneficiary, usually the parents or grandparents of the individual. Beneficiary designations of wills and life insurance policies can often point the desired share to the SNT for the benefit of the person with a disability.
Self-Settled SNTs are funded by the disabled person’s own assets. Often from a personal injury settlement, an outright inheritance, bank accounts or savings bonds in the name of the individual or from accumulated paychecks/ SSI checks, etc.
Pooled SNTs include assets for many beneficiaries and are managed by a non-profit association.