As you get older, you may realize that your adult child who is disabled or unable to work and receives SSI or Medicaid benefits may never be able to care for themselves. A concerned parent should be aware that there are ways to protect that disabled child for life and not jeopardize the child’s government benefits. The best way is to create a SPECIAL NEEDS TRUST.
A Special Needs Trust (SNT) can be established with the child’s own money — such as an inheritance, an insurance payout, or a personal injury settlement — or with the money of a third party. This trust, created from the individual’s equity, is more expensive because it must be approved by the court. The simplest and least expensive SNT to make is when a parent or grandparent or other third party pays for the trust and contributes an amount of money for the benefit of the disabled person, known as the beneficiary.
One of my clients had a brother who was unable to hold a job at age 45 due to severe COPD. The brother received SSI and Medi-Cal, but had very little money for anything but the bare necessities of life. The sister wanted to contribute $100,000 for her brother’s lifelong special needs. She paid for the trust and appointed her other brother as trustee. The trustee set up a bank account in the trust’s name and used the money to pay for the disabled brother’s needs, in addition to his room and board, the only things covered by the government.
WHAT ARE THE BENEFITS OF A SPECIAL NEEDS TRUST?
· An SNT ensures that a person with a disability with assets greater than $2,000 is still eligible for SSI, Medi-Cal, and other government assistance needed for their health and well-being.
· An SNT gives parents the certainty that their disabled child will be cared for if they are no longer physically able to do so.
WHAT ARE THE CONS OF A SPECIAL NEEDS TRUST?
· A diligent trustee should be appointed to handle all money in the trust. The task of the administrator and can last a long time – for the whole life of the disabled person.
The beneficiary should never receive money from the trust – only items for his/her special needs, such as medical and dental expenses, medical equipment, training and education, insurance, transportation, entertainment, even vacations, cars, real estate, accommodations to accommodate to meet the disability and other items to improve the quality of life. The trustee pays for everything and the beneficiary receives what the trust paid for.
· Most people with disabilities want to manage their own money and must be convinced that doing so would disqualify them from receiving government benefits.
Special consideration should be given to benefits if the beneficiary is on Section 8 housing.
If you have a child who will need outside help for the rest of his or her life, consult a lawyer as soon as possible to discuss the possibilities of establishing a Special Needs Trust. You sleep a lot better once the action is taken.