Protect Your Loved Ones with a Special Needs Trust
By Thad J. Murphy, Attorney
Pioneer Law Office
Do you have a loved one who is disabled? The most comprehensive way to protect them is to set up a Supplemental Needs Trust (also known as a Special Needs Trusts or SNT). Their purpose is to maintain the beneficiary’s eligibility for means-tested government benefits such as Supplemental Security Income (SSI) and Medicaid. Both of these programs require that the beneficiary be under the statutory resource limit. If the person exceeds those limits, they lose their benefits.
SNTs are carefully drafted documents that allow persons with disabilities to receive an inheritance, lawsuit settlement, or other funds without losing their eligibility for benefits. Such trusts are meant to provide for needs which are “supplemental” to what is being paid for by the government, i.e. comforts and luxuries unique to the beneficiary including, but not limited to: education, cell phone bills, cable TV, counseling, etc.
A first-party SNT is designed to hold the beneficiary’s own assets. These trusts are particularly useful for a beneficiary who is receiving government benefits and obtains a large sum of money. They allow the beneficiary to keep both their money and their benefits. At the SNT beneficiary’s death, the state is reimbursed up to the amount it paid for the beneficiary’s care with the remaining assets.
A third-party SNT is likely the best option for parents or grandparents (or other individuals, e.g., aunts and uncles, siblings, etc.) planning for their special needs child’s or grandchild’s future. These types of SNTs are funded with the grantors’ (i.e. the individuals who establish the trust) assets. When the SNT beneficiary dies, the remaining assets in the trust can pass to other family members and are not subject to pay back to the state.
It is crucial that an SNT is properly drafted in order to ensure the assets in the SNT are not deemed countable for Medicaid and SSI purposes. If you’re considering this type of planning, speak with an attorney experienced in drafting SNTs.
Thad J. Murphy is an attorney in the Dubuque office of Pioneer Law, located at 1635 Associates Drive, Ste. 102. Thad practices primarily in Social Security Disability, estate planning, special needs trusts, and elder law, which includes Medicaid and VA Pension Planning. If you have any questions please visit pioneerlawoffice.com or call (563) 583-9101. Pioneer Law Office, we help you find your way!