If you are the parent, or guardian, of a special needs child or adult, a Special Needs trust is an essential estate planning document, as it allows you to provide all the supplemental benefits to your child without compromising his or her eligibility for governmental benefits. In order to qualify for governmental benefits such as Medicaid or SSI, an individual cannot have more than $2,000.00 in assets in his or her name in any given month. A Special Needs Trust allows for planning ahead and effectively saving money for your child’s future, without jeopardizing his or her eligibility for government benefits. A Special Needs Trust may be funded when it is created, or may be funded upon your death by a life insurance policy or other investment. Because Medicaid has the ability to “recover” funds paid for your long-term care during life after you have died, particular attention must be paid to how Special Needs Trusts are established. Depending on the source of funding, there may or may not be a “pay back” requirement to the Department of Public Welfare after the death of the special needs individual. This estate-planning tool should only be attempted with the advice of lawyers and tax planning consultants.
The intention of a Special Needs Trust is to supplement, and not supplant or replace government benefits. It is not designed to provide things such as food, shelter and clothing, but rather to allow you to continue to provide the “extras” for your special needs child, without affecting his or her eligibility for health insurance and other valuable government programs. These “extras” include all things that have a “reasonable relationship” to your child’s needs, and may include things such as summer camps, vacations, adaptive equipment, and other things that will enhance the quality of your child’s life.
If your child has a Special Needs Trust, it is very important that all assets, gifts and other income the child receives go into the Trust, not to the child individually. It is important to tell other family members and close friends, who may be making gifts to your child, about this Trust, so that they do not accidentally disqualify your child for his or her governmental benefits. Also, be sure to discuss this with grandparents, who may have named your child in their Wills; a well-intentioned gift may end up disqualifying your child. Instead, let these family members know that they may make gifts to the Trust, or may name the Trust as a beneficiary, so as to preserve your child’s benefits.
As a cautionary note, if you wish to establish a Special Needs Trust for your child, please consult an attorney who specializes in Special Needs estate planning, as this is a highly specialized form of a trust. As there are certain restrictions to qualify a trust as a Special Needs Trust, it is important to discuss this with a qualified attorney. In order to meet the regulations and requirements established by the federal government to qualify as a Special Needs Trust, there are specific statutory language and provisions that must appear in your trust documents. Simply labeling a trust “Special Needs Trust” is insufficient, and may have a very adverse impact on your child’s eligibility for health insurance and other essential government programs, or trigger reimbursement of the government for money paid for your loved one’s care during life.
For more information regarding the Social Security Administration (SSA) regulations: