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.
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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.
Benefits of a Special Needs Trust
A special needs trust plays an important role in your child’s long-term well-being and offers several benefits.
An SNT can provide a supplemental source of income for the beneficiary while maintaining their eligibility for government programs such as Supplemental Security Income (SSI) and Medicaid.
The trust creator chooses the administrator or “trustee” of the trust. Common options include existing family members and professional trustees.
Trustees have fiduciary responsibility to act in the best interest of the beneficiary.
The assets in a special needs trust can be used for a variety of expenses.
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.