Special Needs Trust Attorneys
You can expect experienced legal guidance from our Special Needs Trust Attorneys at The Good Law Group. Call our office now: (312) 629-1212
Being disabled in America is expensive. A study by the National Disability Institute found that households with a disabled adult require an average of 28% more income to have the same standard of living as households without a disabled adult. Even with medical insurance, disabled people have many needs that insurance doesn’t cover. This leaves disabled people with no option but to go without needed care and equipment or pay those costs out-of-pocket.
If the disability prevents the adult from working, these out-of-pocket expenses further deplete already low household finances, making it difficult, if not impossible, to make ends meet or save for the future. As a result, many disabled adults receive public assistance, such as SSDI, SSI, and/or Medicaid. These programs provide income and other financial support to individuals whose disability makes them unable to work and/or lack health insurance.
But disability doesn’t only affect adults. Census data from 2019 found that more than three million children under the age of 18, or 4.3% of the U.S. population, have a disability. Some of these children already receive Medicaid, SSI, or other needs-based public assistance, a necessity that may continue as they transition into adulthood.
However, needs-based public assistance programs like SSI and Medicaid have very strict income and resource limits recipients must meet to maintain eligibility. Typically, an individual can have no more than $2,000 in resources ($3,000 if married) to remain eligible for SSI or Medicaid. But with the average SSDI payment only $1,358 per month, and the maximum SSI benefit $841 per month, this leaves disabled individuals and their families very little to live on. And with the low resource limits, they lack any type of safety net to pay for expected and unexpected expenses and minimal assets to have a decent quality of life.
That’s where a special needs trust, also sometimes referred to as a supplemental needs trust, or SNT, can help. Special needs trusts are designed to hold assets for the benefit of a disabled person while maintaining their eligibility for programs that have an income or resource limit. They can be established by the disabled individual or another family member on their behalf, and beneficiaries can be adults or children. In fact, many parents of children with special needs create special needs trusts to ensure that their child is financially support long after they’re gone. Special needs trusts can be funded with a variety of assets and can be created as a standalone document or created as part of a will or other trust.
Types of Trusts
Trusts and estates attorneys can help determine what type of trust would be best given your specific situation and your goals. There are several different types of trusts available. These include:
- Revocable living trust: This is a trust created by an individual to hold their assets during life and specify distribution at death. The trust’s funds are used for the benefit of the individual who set it up during their life and anybody else they may specify (typically a spouse and/or minor children). The trust can also outline what should happen if the primary trust beneficiary should become unable to handle their financial affairs or make healthcare decisions. A revocable trust doesn’t protect assets in the event of disability; however, it can include trigger language that would turn it into a special needs trust should the beneficiary ever become disabled and needs to be eligible for public benefits.
- First-Party SNT: A first-party or self-settled trust is a trust created by the disabled individual to hold their assets. These trusts are usually created after winning a lawsuit or receiving a settlement because of the incident that led to the disability, for example, with proceeds won following a car accident case.
- Third-Party SNT: This is a special needs or supplemental needs trust created by a third person on behalf of a disabled person. They are typically created by a parent or other family member on behalf of their adult or minor disabled child. The trust can be funded via lifetime gifts or an inheritance at the gift givers death. For example, if grandma wants to give her disabled grandson $10,000, she can either make the gift directly to the trust during her lifetime or name the trust as a beneficiary in her will.
Benefits of Special Needs Trusts
Special needs trusts maintain the trust beneficiary’s eligibility for needs-based public assistance by holding and using the trust’s assets on their behalf. Disbursements are made to supplement the person’s needs, meaning funds are used to pay for things not covered by other forms of assistance. For example, trust funds would not be used to pay for the medical care of someone who has health insurance or Medicaid, unless it is an uncovered expense. Payments are typically made directly to the vendor, not the trust beneficiary, to avoid them being considered over-resourced for the month and losing eligibility. But special needs trusts have other benefits as well.
- Avoid probate: If created and funded properly, trusts avoid the need to go to probate at either the trustor’s (the person who created the trust) or the beneficiary’s death. Probates can be a lengthy, costly process, and proceedings are public. Because the trust document outlines exactly how the trust’s assets should be distributed at the death of the trustor or beneficiary, distribution happens automatically and without the need to go to court. Trust proceedings are also private.
- Control distributions: The trustor can designate exactly how the trust’s funds are to be used. There are certain restrictions every SNT must have to ensure the beneficiary remains eligible for public assistance, but beyond that, the trustor can impose whatever rules he likes on how the trust’s assets are distributed, including designating who receives them at the beneficiary’s death.
- Prevent Medicaid payback: Third-party special needs trusts protect the trust’s assets from being used to repay Medicaid at the beneficiary’s death. First-party trusts generally are not granted that same protection, which means at the beneficiary’s death, any assets remaining in the trust will first go toward repaying Medicaid for care provided during the beneficiary’s lifetime, leaving nothing left for their heirs.
Why You Should Hire a Special Needs Trust Attorney
Estate planning can be a complicated process and establishing a special needs trust even more so. An incorrectly drafted disability trust can eliminate the disabled beneficiary’s eligibility to receive public benefits or leave the trust funds open to creditors. The special needs planning attorneys at The Good Law Group are experienced in creating special needs trusts designed to maintain eligibility for public assistance and can help guide you to the one best suited for your circumstances.
Contact our special needs trust attorneys at (312) 629-1212 to discuss establishing a special needs trust to protect you or your loved one’s eligibility for public benefits.