When Is A Special Needs Trust Needed? 7 Critical Scenarios Explored

Have You Wondered When Is A Special Needs Trust Needed?

A special needs trust is needed if your child with a disability is expected to be able to collect Supplemental Security Income, SSI, or some other government benefits, which could include Medicaid, SNAP, or housing benefits, when they become an adult. This would be because your child is unlikely to be able to support themselves by working independently. If you think this is a possibility, and you have assets you would like to leave your child when you die, you should have a Special Needs Trust.

What Is A Special Needs trust?

A special needs trust, also known as a “supplemental needs trust”, is an estate planning tool that enables a person with a disability or functional needs to receive financial support without negatively affecting any means-tested government benefits they’re receiving like Medicaid or Supplemental Security Income (SSI). Because needs-based government benefits have income and asset limits, receiving financial gifts or assets could reduce or eliminate eligibility. This means if you have an adult daughter with autism on SSI benefits and want to give her money to meet her living expenses, she could be disqualified from receiving needs-based government benefits. Likewise, if you die and leave her your Roth IRA worth hundreds of thousands of dollars or any amount that exceeds the asset limit, she could no longer receive SSI or Medicaid. But if you put the assets into a special needs trust for your daughter, she can keep her benefits and receive your financial support for the rest of her life. What can a special needs trust pay for? Money in a special needs trust is meant to be a supplemental resource, meaning it should cover expenses that aren’t already covered by government benefits. More specifically, the beneficiary should use the money for expenses other than food and shelter. You must ensure money is spent in accordance with IRS guidelines, so hold on to receipts or make a spreadsheet to keep track.

Benefits of a special needs trust

Setting up a special needs trust for someone can help you enhance their quality of life and give you peace of mind. These trusts ensure that a person with functional needs will receive the financial support they need throughout their lifetime, whether you’re here or not. Here are a few key benefits of special needs trusts: Your loved one can still receive needs-based government benefits. In some situations, creditors or lawsuit winners can’t access the funds or assets in the trust. Trust funds can be invested by a trustee or financial advisor. You may be able to have control over who inherits the trust when the beneficiary dies. Trusts provide protection against financial abuse, as trustees have a fiduciary duty to act in the beneficiary’s best interest.

Need Information About Special Needs Trusts?

I am Tom Sannicandro, a Special Needs Trust Attorney and I am here to help. I am the founder of a nonprofit corporation that provides quality information about resources available to families as well as providing affordable Special Needs Trusts and estate planning for families. I have over 20 years of experience helping families just like yours. Find out more information at SpecialNeedsTrustsOnline.com or click here to set up a free appointment