The services available through SSI and Medical Assistance can be substantial. But the cash benefits provided by these programs tends to be lacking. And in order to qualify for the programs, a person must impoverish themselves – e.g., having no more than $3,000 in assets for Medical Assistance. A supplemental needs trust can be used to protect assets and establish an income for a person on one of these programs. Without the proper use of trusts, a person may become ineligible for the very programs upon which they are dependent.
What are Supplemental Needs Trusts?
Supplemental Needs Trusts are irrevocable trusts that benefit a person with a disability. In a Supplemental Needs Trust, the grantor – usually the individual's parent, grandparents, or a family member – puts money in a special irrevocable trust where the person with special needs is the beneficiary.
Supplemental trusts are intended to fill the gaps that benefit programs cannot fill. This may include paying for such things as, for example:
- Trips or vacations
- Education and tutoring
- Goods and services to improve the quality of life
- Athletic competitions
- A personal care attendant
- Advanced or elective medical procedures
Notably, the funds from either trust cannot be distributed to the individual directly. Rather, they must be paid to the vendor or third party who is providing the goods or services.
Supplemental Needs Trusts as an Estate Planning Tool
A Supplemental Needs Trust gives someone the ability to leave a gift or inheritance to a person on Medical Assistance or SSI without making them ineligible for the program. The trust can be established as part of a revocable living trust, as a testamentary trust in a will, or an independent irrevocable trust.
Supplemental Needs Trusts are complicated to set up. There are numerous requirements and limitations that, if not adhered to, can make the trust ineffective. In other words, if done wrong, the person will become ineligible for the program they depend upon. Make sure you have effective counsel drafting and setting up the trust. This is not something you should try to do yourself.
Supplemental Needs Trusts can be a vital estate planning tool if one of your heirs will be someone with a disability that is receiving government benefits. And Special Needs Trusts are an important tool for managing resources and finances. If you have questions about Supplemental Needs Trusts, please contact Signature Law for a free consultation.Schedule a Free Consultation