Planning With Special Needs Trusts

When your estate plan includes family or friends with special needs, care must be taken.  As the Supplemental Security Income (SSI) program is means tested, beneficiaries are allowed only $2,000 in countable assets to retain eligibility.  Although Social Security allows beneficiaries to have one house and one car, any other assets over $2,000 will be countable and affect eligibility.  Therefore, if you leave money to a loved one who is receiving SSI or Medicaid benefits, there is a good chance it will affect their eligibility.  More importantly, it may affect the medical insurance they receive as part of their benefits.

One option to consider when your estate plan includes special needs family members is a Special Needs or Supplemental Needs Trust.  With this option, instead of leaving your assets directly to your loved one, you leave it to the Special Needs Trust for their benefit.  If the trust is properly drafted, the beneficiary can benefit from the assets without affecting their eligibility for Medicaid or SSI.  This type of Special Needs Trust is a Third Party Special Needs Trust.  Another type of Special Needs Trust is the Self-Settled Special Needs Trust, which will not be discussed as part of this post.

Care should be taken by the Trustee when making distributions from the trust to the beneficiary.  Assets of the trust cannot be distributed to pay for anything that SSI or Medicaid.  Trusts are commonly used to pay for personal care attendants, vacations, legal or accounting fees, education, rehabilitation,  and vehicles.