Why Establish a Special Needs Trust?

by Joanne Marcus, MSW

For families providing care and financial support for loved ones living with a disability, the thought of not being there can be overwhelming. To deal with the “here and now,” planning for the future is sometimes put aside. If an individual’s disability may affect his ability to work or manage finances, parents or caregivers must determine what assets, income, and other resources their child or adult family member will rely on in the future and who will help the individual manage these resources.

One option that can help protect access to Supplemental Security Income (SSI) and Medicaid is a special needs trust (SNT), which is an arrangement by which a person (grantor) makes a gift of funds to a trustee to be used for the sole benefit of the beneficiary living with a disability. The SNT is established to protect the funds and insure that the funds will be used to enrich the quality of life of the beneficiary. An SNT is for a beneficiary who can benefit from trust administration services, which includes the investment and management of the funds and approving disbursements that are for the sole benefit of the beneficiary.

If a beneficiary receiving SSI and Medicaid also receives a monetary gift, personal injury settlement or inheritance, these additional assets could disqualify him from receiving crucial public benefits because of the $2,000 limit in cash assets. However, funds that are placed in an SNT will not jeopardize the beneficiary’s SSI and Medicaid benefits.

There are two types of SNTs: self-funded and third-party. A third-party SNT is funded by a close family member or friend. A self-funded SNT is funded by the individual with a disability, generally from a personal injury settlement or social security back payment. There are options as to who will provide trust administration services. One option is a pooled SNT, where the funds are administered by a nonprofit organization. A separate account is maintained for each beneficiary of the trust. For purposes of investment and management of funds, the funds are pooled to offer greater investment opportunities and lower administrative costs. Once the trust is established, the trustee manages and invests the funds and approves disbursements that are for the sole benefit of the beneficiary; the trustee has legal ownership of the trust funds. The trustee has a responsibility to ensure that the trust funds are available for supplemental needs that will improve, to the extent possible, the quality of life of the beneficiary. In addition, the trustee has the duty to be prudent and to safeguard the trust property for the beneficiary. A written financial accounting should be provided by the trustee quarterly or be available online. The trustee will review requests for disbursements based on the following criteria, whether:

  • benefits such as SSI and Medicaid would be jeopardized.
  • the request is for the sole benefit of the beneficiary.
  • the request is prudent.
  • the request is consistent with the intent of the grantor.

For the beneficiary, having an SNT will mean the difference between receiving services that meet basic needs and a life that includes opportunities over and above basic needs that public benefit programs cannot provide. Examples of disbursements that can be made from the trust include prescription and nonprescription medication and devices that are not paid for by Medicaid (e.g., eye glasses, hearing aids, and prosthetic devices), medical services that are not paid for by Medicaid (e.g., dental care and hearing exams), assistive technology, vocational training, educational expenses, transportation, household items, recreational expenses, furniture, clothing, and electronic equipment.

When the beneficiary receives SSI or Medicaid, the local Department of Social Services and Social Security Administration are notified by the trustee of the existence of the trust. Generally, the following disbursements would impact SSI benefits: food, mortgage (principal and interest), rent, real estate taxes, gas, electricity, water, sewer, homeowner’s insurance, and cash payments to the beneficiary. The trustee must follow certain guidelines and be knowledgeable about the changing rules governing SSI and Medicaid benefits.

There are many decisions involved in setting up a special needs trust. Once an SNT is established, there is comfort in knowing that a loved one can have an enriched quality of life above what entitlement programs can provide.

Joanne Marcus, MSW, is the executive director of the Commonwealth Community Trust, a national nonprofit organization that administers third-party and self-funded pooled special needs trusts. Please visit www.commonwealthcommunitytrust.org or call 888-241-6039 about establishing an SNT.

Article first published in the September/October 2013 issue of Autism Asperger’s Digest

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