What Is a Special Needs Trust?
A special needs trust (SNT) is a legal arrangement, typically set up by a parent or guardian. An SNT ensures that assets, often money or a life insurance policy, are held in an account and used to support the child.
The funds belong to the trust, not your child, so they won’t be factored into the child’s government benefits eligibility. An SNT is intended to supplement the child’s government benefits.
Who Needs a Special Needs Trust?
If you’re the parent or guardian of a child who may not be able to financially support themselves due to a disability or medical condition, you should consider establishing a special needs trust. A trust can provide additional financial resources to a special needs individual without disrupting government resources.
Some government benefits that a person with special needs may rely on, such as SSI, Medicaid and others are “means tested,” meaning they are available only to those with limited income or assets. And they often have extremely low asset limits. For example, any individual using SSI may not have more than $2,000 of countable resources.
When a parent wants to provide support after their death to a special needs person, it’s crucial that the parents’ assets pass correctly to ensure the assets do not cause the special needs person to lose their government benefits.
Any resources left directly to the beneficiary without use of a trust could disrupt these benefits, ultimately taking money and support away from the beneficiary. The provisions to create a special needs trust can be incorporated in a parent’s revocable trust or will and do not have to be a stand-alone document.
How Does a Special Needs Trust Work?
A special needs trust can provide a range of benefits while maintaining government benefits eligibility for individuals with disabilities or special needs, but it’s important to understand when these benefits end and what expenses an SNT covers.
When Do the Benefits of an SNT Legally End?
The benefits of a special needs trust can end in several situations, including:
The trust runs out of funds.
The beneficiary no longer qualifies as someone with a disability or special needs.
The beneficiary passes away.
A special needs trust offers the following advantages:
Assets held in the special needs trust do not belong to the individual for whom the trust is established for. This means that funds held in the trust are not taken into consideration for determining the eligibility for receiving financial support from State and Federal programs such as: Medicaid, Medicare and Supplemental Security Income (SSI).
Funds from the trust can pay for additional care, therapies, and activities that improve the individual’s well-being.
A special needs trust has a trustee (a person that manages it). The trustee is responsible for making sure the funds are used properly.
The benefits of a special needs trust can create a meaningful financial plan that prioritizes the individual’s unique needs.