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Special Needs Trusts

Social Security and Medicaid are important government programs for persons with special needs. Supplemental Security Income (SSI) is a through the Social Security Administration provides monthly income to someone who cannot earn enough to be self-sufficient. Medicaid provides long-term care health insurance for individuals with special needs. In order to qualify for SSI or Medicaid an applicant can have only $2,000 and there are income limits. If the person has more than $2,000 or income over the limits because of excess savings, an inheritance or an accident settlement, the person is over the asset limit and the government may stop their benefits. The person would not receive SSI and would not have Medicaid health insurance.

SSI and Medicaid do count money or property placed into a special needs trust as an asset of the person who is receiving the government benefits. Therefore, the person is not over the $2,000 asset limit. A special needs trust allows the beneficiary to receive government benefits while still receiving funds from the trust.

The type of special needs trusts depends on the source of the money that will be placed into the trust.

A “first-party” special needs trust holds assets that belong to the person such as, an inheritance or an accident settlement.

A “third-party” special needs trust holds funds that belonged to other people who want to help the person such as, gifts or inheritance.

Parents and family members who want to make gifts or leave an inheritance someone with special needs would set up a third party special needs trust as part of their estate plan. The trust can hold any kind of asset, including a house, stocks and bonds, and other types of investments.

The main difference between a first party and a third party special needs trust is a third-party special needs trust does not have a “payback” provision. This means that when the beneficiary with special needs dies, any funds remaining in the trust can pass to other family members, without having to be used to reimburse the government.

The following are some examples of how a special needs trust can help of person on SSI or Medicaid:

  • buy a car and pay for maintenance and gas
  • buy a home and pay for house cleaners, maintenance, taxes, and insurance
  • acupuncture/yoga/gym membership
  • appliances (TV, DVD, washer, dryer, microwave, refrigerator)
  • bus pass / public transportation costs / uber rides
  • clubs/dues (e.g. health clubs, service clubs, advocacy groups, museums, zoo)
  • computers/software/internet service
  • courses/classes (academic or recreational/hobby)
  • home décor and furniture
  • dental work, physician services, therapies and counseling not covered by Medicaid
  • fitness equipment
  • musical instruments / music lessons
  • non-food grocery items ex. over-the-counter medications, vitamins, cleaning supplies and toiletries etc.
  • service animals or pets, pet supplies and veterinary care
  • vacations / travel (except SNT cannot pay for food).

A special needs trust can greatly improve the quality of life for someone with special needs. Of course, every person with special needs is different, which means that every special needs trust is going to be different as well. The only way to determine which special needs trust is right for your family is to meet with a qualified special needs planner to discuss your needs.

Kile & Kupiszewski law firm has over 20 years experience in the area of special needs planning. When you come in for a consultation we will help you to understand special needs trusts and how they can benefit the person with special needs. We listen to you and will formulate a plan that meets the needs of your loved one. Call us today to schedule a consultation 480-348-1590.


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