Children with special needs typically require special parents. This article is intended to provide peace-of-mind through education for those incredible moms and dads who invest so heavily into the daily lives of their children, and would like to learn more about how to best protect their children in the future.
What is a Special Needs Trust?
A special (or “supplemental”) needs trust (SNT) is generally used for children, or other family members, that may qualify for needs-based government benefits. The classic case: a child has a physical disability or mental illness that qualifies him/her for Medicaid or Supplemental Security Income (SSI) benefits that would be lost if the child received an inheritance. Such a disability or illness may not be known to us today—what if the child is in an accident later in life, which causes them to qualify for state aid? As unfortunate as it is when a loved one is afflicted with disability or illness, the situation can be made much worse without proper SNT planning.
How Does a Special Needs Trust Work?
Medicaid benefits are based on the applicant’s total assets and income. The SNT provides that the Trustee has total discretion as to making distributions that benefit the special needs beneficiary. Using this “discretionary language” means that neither the assets nor the income of the trust are treated as “owned” by the special needs beneficiary. The result—Medicaid will pay for medical expenses and basic living costs, but the assets in the SNT can be used to provide the beneficiary with some of the niceties not generally provided by the state (a “slush fund”).
For example, the SNT can purchase a wheelchair that’s more expensive, and hopefully more comfortable, than one that the government would provide. Or, funds from the SNT can be used to allow your child to stay in a single room at an assisted living facility or rehabilitation center, as opposed to a group room. In essence, the SNT ensures that the child’s inheritance won’t disqualify them from state aid, and creates a separate pool of money available to purchase higher level comfort items. By avoiding program disqualification, this strategy also makes your child’s inheritance last much longer!
The parents of a special needs child will know that their child’s inheritance will be shielded from being consumed by medical expenses, even if the need is not currently known, as in the accident example. This is a great sense of relief for many of our clients who are concerned about their children when the clients are no longer there to protect and care for them.
Thank you for reading, and for ensuring that your sons, daughters and/or grandchildren are well taken care of!
-Attorney Bryan M. Etter
Wiley Etter, LLC