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“Special Needs Trusts” are powerful and important tools to be used in planning for the needs of individuals with physical, psychiatric, and/or intellectual disabilities. The funds in a properly established Special Needs Trust (“SNT”) can be used to supplement public aid and assistance, such as Supplemental Security Income (“SSI”) and Medicaid, without disqualifying a person with special needs from receiving such public aid and assistance.
A trust is a legal entity in which legal title to assets (including money deposited in an account) are held by a trustee, who distributes funds on behalf of a specified beneficiary, according to the terms and conditions of a governing instrument, usually a Will or a written Trust Agreement. There are three types of Special Needs Trusts: First-party, self-settled trusts; Third party trusts; and Pooled trusts. As the name implies, first-party, self-settled trusts are created using the assets of the special needs individual. Third party trusts are created by and funded by someone other than the special needs individual, using the assets of the third-party. A Pooled Income Special Needs Trust is administered by a nonprofit association, and while a separate account is maintained for each special needs beneficiary, all accounts maintained by the nonprofit association are pooled for investment and management purposes.
Since most public assistance, such as Medicaid, is needs based, an individual with special needs does not ordinarily qualify for assistance if the individual owns more than a minimal amount of assets. Ordinarily, a special needs individual has to “spend down” his or her assets before qualifying for public assistance. A properly drafted SNT can keep the assets available to improve the quality of life for a special needs individual, while at the same time permitting the individual to qualify for public assistance.
SNT’s are often created in the Will of a parent who wishes to leave an inheritance for a special needs child. Another common reason to create an SNT occurs when a special needs individual learns he or she will require care that may be covered by public assistance. The individual may be entitled to create a SNT with his or her assets, thereby avoiding the need to first spend those assets on care before qualifying for public assistance.
Special Needs Trusts are technical and highly regulated. If the SNT is not properly created in accordance with applicable law and regulations, it will fail in achieving its purpose. It is highly recommended that you consult with an attorney when considering the use of a Special Needs Trust. The law office of Liebmann Family Law can assist you.