Special Needs Trusts and Eligibility for Benefit Programs

“About one in every five people in the United States has a disability.”

– Surgeon General (MedlinePlus, Disabilities)

Some children are born with a disability. Others become sick or have an accident while young that results in a disability.  Children who are intellectually and/or developmentally challenged have usually spent their lifetime being loved and cared for by their parents. Many families provide full-time care for a severely disabled child for decades as they mature to full adulthood and middle age. In this time, they may have resisted tapping into government programs or other in-home social services.

At some point, the question arises, “Who will take care of my child when I’m gone?” and “Where will the money come from to care for my child?”

If these questions aren’t addressed in very practical ways with established long term care plans, a crisis arises on several fronts when the parents or primary caregiver becomes too sick to provide care or passes away. My word of caution to you, parents, do not hesitate to find out what you can do to provide for your adult child with special needs when you are gone.

Establishing a long-term life planning not only for yourself, but for your child, will give everyone significant peace of mind. A plan and decision-making process developed during the parents’ lifetime reduces distress for the adult child when transitioning from home to community services or other new arrangement.

 What resources are available to support your Adult Special Needs Child?

Special needs individuals under the age of 65 are eligible for Medicaid, Supplemental Security Income (SSI) and other benefit programs as long as they do not have more than $2,000 in their own name.

When you, relatives and friends give money to the special needs adult, either now or in their wills, the special needs adult might become ineligible for some benefits, creating the need to spend down the money and re-apply for the benefits. Some parents try to solve this problem by disinheriting their child and giving the money to a sibling or family member who promises to care for the child, a solution that puts enormous stress on the sibling or family member and doesn’t guarantee that the child’s needs will be met.

Your best bet is to create a special needs trust. This is a living trust that is created for a person who, because of physical or mental disability, is receiving federal and state government benefits for medical care and daily living needs, such as SSI, Medicaid, vocational rehabilitation, subsidized housing and others.

The purpose of the special needs trust is to provide a source of funds without disqualifying the beneficiary from receiving those government benefits. The money in their own name stays at the $2,000 or below level, they receive their government benefits to pay for their basic care, and they have the advantage of getting additional money from the trust at the trustee’s discretion, to pay for care over and above the basics, without endangering their eligibility for government entitlements.

A special needs trust may be created in your will and acts as a receptacle for money earmarked for your child. All money that is left to your child at any time will go into this trust, even if it is a gift or bequest from another family member or a friend.

Typically, special needs trusts are designed so that none of the money can be used for food, clothing and shelter, because these are all services provided by the government programs, but the money may be used for amenities government programs don’t provide or to supplement the essentials.  Imagine how additional funds from the special needs trust can improve the quality of life for your adult child! Travel, entertainment, and recreation come to mind. Your child will live a better life and also continue being eligible for government programs.

Of course there are many variables to consider in setting up any trust and estate plan. Relying on the guidance of an experienced special needs law and elder law attorney is smart.  That’s why I am here.