The Law Provides Protection For Special Needs Trusts.
In these true-to-life examples, the individuals and families could have remained eligible for public benefits and used the newfound money to supplement, but not supplant public benefits, overall improving the quality of life for each person. Laws and regulations under both the federal and state governments would have allowed a Special Needs Trust to be established in these examples to protect eligibility of the named individuals.
Medicaid and SSI regulations established the requirements for a Special Needs Trust with the purpose of allowing trust assets to be a resource to supplement the benefits of Medicaid and SSI, but not replace them. Generally, these regulations require the trust to be irrevocable, the beneficiary must be disabled at the time of funding and the distributions or payouts from the trust must be for additional needs beyond the basic necessities met by the public benefits. If drafted and administered properly, the assets in the Special Needs Trust will not count as a resource for the purpose of determining the eligibility for Medicaid and SSI.
If the Special Needs Trust is funded from assets of the disabled person, such as from a settlement as opposed to a third party, Medicaid regulations require that the trust include a provision that assets remaining at the death of the disabled beneficiary be used to reimburse the state Medicaid Agency for benefits paid to the beneficiary. Also, the beneficiary must be under the age of 65 when the trust is created.
Is A Special Needs Trust Always Right?
No, as there may be other means to protect these public benefits, and you should carefully evaluate the long term consequences and restricted access to the income and principal of the trust. For example, the beneficiary may regain capacity to work and the overly restrictive standard for distributions in the trust may deny the beneficiary access to needed assets.
Each situation requires careful analysis by a qualified attorney and trust advisor. Call your Credit Union’s trust officer who will discuss your unique situation and team with a qualified attorney for the development of the right plan for you and your family.
