Naperville Estate Planning Lawyer on Protecting Eligibility for Government Programs with Special Needs Trusts

When you think about a time when you will no longer be around to care for your family, it may be scary to consider how those who need you most will fare when you are gone. This may be especially true if you have a son, daughter, brother, sister, or cousin with a serious disability or any other special needs who is unable to properly care for him- or herself.

As an estate planning attorney, I understand the challenges that come with caring for a person with special needs, as well as the difficulties associated with planning for his or her future. In such cases, it may be a good idea to establish a special needs trust for the benefit of your disabled loved one.

What is a Special Needs Trust?

A special needs trust (SNT) is sometimes called a supplemental needs trust. Like any trust, an SNT is a financial instrument that places assets under the ownership of the trust to be used in the future to provide benefit for named beneficiaries. With a special needs trust, there is often just one beneficiary—a family member or loved one with special needs. Because the funds in the trust are owned by the trust, they are not considered part of the disabled person’s available assets. This is important because available assets will affect the person’s ability to qualify for government programs like Supplemental Security Income (SSI), Medicaid, and others.

A special needs trust can be funded through injury settlements, insurance payouts, gifts, or inheritances. If the disabled individual were to receive such payments without the trust in place, he or she could lose the benefits on which he or she currently relies.

Income and Asset Concerns

Government programs like Medicaid, SSI, and most subsidies for housing maintain guidelines regarding income and assets for qualifying individuals. They also tend to have long, arduous application processes that can take months or years. If your loved one has already invested significant time and energy in applying or qualifying for these programs, leaving him or her an inheritance directly could result in a number of problems.

Consider a hypothetical scenario in which you plan to leave $150,000 to your disabled adult son. His condition is such that without government help, the costs associated with his care would total roughly $50,000 out-of-pocket each year. Without even considering food, housing, taxes, and other necessities, leaving him $150,000 would provide for about three years of care, but it would also probably disqualify him from receiving Medicaid and SSI. When the money was gone, he would have to apply all over again, leaving him with virtually nothing in the meantime.

If you were to use that $150,000 to fund a special needs trust for your son’s benefit, however, he could keep receiving his government benefits. The inheritance would be available for needs that are not covered by the government programs such as modifications to his home and expenses for travel to specialist visits.

Call a DuPage County Estate Planning Lawyer

There are specific guidelines and rules that must be followed when creating and funding an SNT. An experienced Naperville estate planning attorney can help you through the process. Call 630-756-1160 for a confidential consultation at the Gierach Law Firm to get started today.

Sources:

Social Security Administration

CNBC