Special Needs Trusts
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One way of providing for your child with special needs is through a
Special Needs Trust (SNT). Also called a “supplemental care trust,” an SNT is a
legal way to make sure that the assets you leave to your child are available when he
or she needs them. An SNT gives your child use of funds, while the assets are
handled responsibly. This page explains SNTs: their benefits, proper uses, and how
you can fund an SNT for your child. It also goes over revocable trusts, which can be
set up along with your child’s SNT.
What are the benefits of a Special Needs Trust?
The services and funds through government programs, such as Medicaid, are
helpful for medical and long-term care, but the income from these programs is quite
fixed, often leaving many unmet needs. If you leave money to your child in a
traditional will, it is looked at as an asset, disqualifying your child from any
public benefits if the amount is too high. All the money in the will must be used
before your child’s eligibility will be restored. This would leave only those funds
from government benefits for your child’s long-term care and other
expenses.
To be sure that the money you leave for your child can be used for their
needs, and that public benefits such as Medicaid will continue, the assets must be
placed in the SNT and set up the right way. While the government states that a
person with a disability cannot have a trust and still have public benefits, the SNT
is okay because the trust does not belong to the person with a disability. He or she
is named as a beneficiary of the trust and is mainly the only one who uses the
assets.
It may be tempting to leave money for your child with special needs to one
of your other children. However, a trust will protect all of your children from hard
money situations, which can sometimes lead to problems between family members.
People with disabilities or special needs are often are not able to manage money
themselves; a trust provides for them (and only for them) in a structured way.
What are acceptable uses for SNT funds?
The SNT must be designed clearly to add to, not replace, government
benefits. Money from the trust cannot be given to the person with a disability.
Instead, it must be transferred to third parties to pay for the needs of the person
with a disability. The SNT may be used for expenses such as those Medicare and/or
Medicaid will not cover:
- Out-of-pocket medical and dental expenses
- Eyeglasses
- Yearly checkups
- Transportation (public or private)
- Car maintenance
- Insurance (also payment of premiums)
- Rehabilitation/therapy
- Extra dietary needs
- Materials for a hobby or recreation
- Computer or electronic devices
- Travel or vacation
- Entertainment, like going to a movie, ball game, concert, etc.
- Items that add joy and quality to life, such as furniture or a TV
- Sports training, equipment, or competitions
- Personal care aide or escort
The trust money can be used for items not paid for by government
assistance, such as health care costs, dental work, home repair, or schooling. It
may NOT be used for food, shelter, and clothing. When setting up the trust, make
sure to use a lawyer who has experience with these type of trusts and is familiar
with how the money can be used.
How can I fund an SNT for my child?
Some ways of funding a special needs trust are:
- Insurance
- Savings and investments, such as money in retirement funds
- Support and gifts from friends and family members
- Property, such as a family home
- Military benefits
The money in the trust can be invested and earn money without limits. The
assets and earnings belong to the trust, not the child.
What is a Revocable Trust?
A revocable trust is an added fund you can set up along with your child’s
SNT. You can set up this trust while you’re living, but you are allowed to make
changes to it as you see fit. A revocable trust is of great value if you set it up
with your will. Your assets can be funneled into the trust automatically upon your
death, without the costly and time-consuming process of a will. Another advantage of
this is that other family members, like grandparents, can also use the trust to gift
money to your child.
Who will serve as trustee for your child?
Choosing the right person or people to handle your child’s SNT is a key
step. The trustee will be in charge of spending the money, knowing the laws that
govern it, and completing all tasks, like filing taxes and balancing the account.
The trustee may be:
- A family member, such as a sister or brother
- A lawyer
- A trust manager
It may also be possible to choose two people for this role. Your choices
will depend partly on the state in which you live, as the laws over who is allowed
to serve as trustee differ greatly from state-to-state. In some states, family
members are not allowed to fill this role, while in other cases a family member may
be required. No matter how you name the trustee or trustees, you’ll want to be
certain the trustee understands the job he or she is taking on and is able to
complete his or her duties.
Resources
Information & Support
For Parents and Patients
Planning Your Child's Future
A planning guide for parents and guardians with information about special needs trusts and much more by the Pacer Center.