If you have a special needs child or face your own disabilities due to accident or injury, you may have questions about special needs trusts. These types of trusts form the framework for a lifetime of income while helping special needs individuals also qualify for state or federal benefits programs. It is possible to receive payments from assets that don’t count against you for benefits eligibility. Let’s look at how a special needs trust attorney can help you plan for the future of a disabled individual.
The Future of a Special Needs Child
If you are a parent of a special needs child, you may worry about their future. Who will care for them after you are no longer capable? How will they get along without you? The good news is that you can prepare them for a future when you’re no longer around. Your attorney can design a 3rd party trust specifically for saving money for a disabled individual’s future.
A trust is just a framework that holds money, almost like a savings account. You can keep assets like homes or cars in a trust also. The trust is not owned by you or by the special needs or disabled individual. It is its own entity. When you draw up a trust with your attorney, you put the trust’s parameters in place. These parameters include what the trust allows.
A 3rd party special needs trust allows the disabled individual to spend on certain items that will not cause ineligibility for their Medicaid or SSD benefits. Both programs put caps on income and assets.
Because the disabled individual does not own the trust, its assets do not count against benefits eligibility.
Setting up a 3rd Party Trust (Special Needs Trust)
An attorney sets up a 3rd party trust for the benefit of someone other than yourself. You may set up a special needs trust using:
- Settlement for a disability causing injury
- Monetary gifts
- Other sources
Setting up a trust properly so that it does not count against eligibility for benefits programs is a complex process that your attorney can accomplish with you. Ensure that you discuss all aspects of the trust with your attorney so that they understand why you need a trust and what you hope to accomplish.
Without drawing up a trust, these assets would go directly into a bank account. If the disabled person owns the bank account, the value counts against their eligibility for benefits. Because of income or asset caps in these programs, they could lose valuable benefits, including:
- SSD payments
- Health insurance coverage
- Residential eligibility
First Party Special Needs Trust (D4A Trust):
First-party trusts are for situations where you are funding your own disability before age 65. These types of trusts are irrevocable, and you must be considered disabled by the Social Security Administration to open one. Only certain family members may create a first-party special needs trust for you. This type of trust includes a Medicaid payback provision. Individuals often make a first-party trust for:
- Personal injury settlement
- Unexpected inheritance
- Inheritance received by a disabled person where there was inadequate planning
- Alimony and child support issues
Protect Your Wealth
Inheriting or receiving a large amount of money can disqualify you from receiving the benefits you desperately need. Losing eligibility means that you must now use your inheritance or court payout on your essential expenses until you can reapply for benefits. This process is known as a “spend-down” to requalify.
With a special needs trust, you can avoid a spend-down and keep large payouts in a special needs trust instead. The trust pays you for the items you need that your benefits do not cover. Medicaid and SSD are the bare minimums of what it takes to live. Give yourself or your special needs child the gift of future quality of life.
When you establish a special needs trust, your disabled loved one can receive a monthly income from the trust and still qualify for the benefits they desperately need. If you establish your own trust for your disability, you can fund the trust and set it up to care for your needs while still receiving the benefits you need from SSD and Medicaid.
Setting up a special needs trust establishes a disabled individual’s quality of life for their entire lifetime.
We Can Help
Our special needs attorneys at Hogan, Edwards, and Blue advise you about which type of trust would work best for your unique situation. Depending on who the trust is for, what you hope to accomplish, and the benefits you want to qualify for, we can design a trust around your needs. Talk with us today to find out how we can help you get started.