As you get older, you may find that your adult child who is disabled or unable to work and receives SSI or Medicaid benefits may never be able to care for themselves. A concerned parent should know that there are ways to protect that disabled child for life and not jeopardize the child’s government benefits. The best way is to create a SPECIAL NEEDS TRUST.
A Special Needs Trust (SNT) can be created from the child’s own money, such as an inheritance, insurance payment, or personal injury settlement, or money from a third party. This trust created with the individual’s own funds is more expensive because it must be approved by the court. The easiest and least expensive SNT to do is when a parent or grandparent or other third party pays the trust and contributes a sum of money for the benefit of the person with a disability, who is known as the beneficiary.
One of my clients had a brother who, at age 45, was unable to hold down a job due to severe COPD. The brother received SSI and Medi-Cal but he had very little money for anything beyond basic needs. The sister wanted to contribute $100,000 for her brother’s lifetime special needs. She paid for the trust and named her other brother as trustee. The trustee opened a bank account in the name of the trust and used the funds to pay for the needs of the disabled brother, beyond his room and board, which are the only things covered by government benefits.
WHAT ARE THE ADVANTAGES OF A SPECIAL NEEDS TRUST?
· An SNT ensures that a disabled person with assets of more than $2,000 will continue to qualify for SSI, Medi-Cal, and other government assistance necessary for his or her health and well-being.
· An SNT provides parents with peace of mind that their child with a disability will be cared for when he or she is no longer physically capable of providing care.
WHAT ARE THE DISADVANTAGES OF A SPECIAL NEEDS TRUST?
A diligent trustee must be appointed who must handle all the money in the trust. The job of the administrator and could last a long time, throughout the life of the disabled person.
The beneficiary will never be able to receive cash from the trust, only special needs items such as medical and dental expenses, medical equipment, training and education, insurance, transportation, entertainment, including vacations, cars, real estate, modifications to accommodate disability and other elements to improve the quality of life. The trustee pays everything and the beneficiary receives what the trust has paid.
· Most people with disabilities want to manage their own money and must be convinced that this would disqualify them from receiving government benefits.
· Special care must be taken with distributions if the beneficiary is in Section 8 housing.
If you have a child who will need outside assistance for the rest of his or her life, consult an attorney as soon as possible to discuss the possibilities of establishing a special needs trust. You will sleep much better once the action has been taken.