Special Needs Trusts
Government programs – in the form of Supplemental Security Income (SSI) and Medicaid – are very important for people with disabilities. These programs provide cash benefits, medical coverage and long- term supports and services. The income level and financial resources of an individual with a disability, or family who is applying on behalf of a member with a disability, must not exceed a certain level in order qualify for these government benefits. Benefit recipients are allowed to retain only a total of $2,000 in assets, with some exceptions. A person with a disability receiving SSI, who accumulates more than $2,000 in cash resources, may lose SSI and, possibly, Medicaid.
Government benefits provide only for the bare necessities: food, shelter, and clothing. These benefits amount to less than a federal poverty level income. Obviously, there are more things and activities beyond these basics that add quality to life. When planning for someone with special needs, this poses a problem. Fortunately, the government established rules allowing assets to be held in trust for a recipient of SSI and Medicaid, as long as certain requirements are followed.
The trusts, called Supplemental Needs or Special Needs Trusts (SNTs), preserve government benefit eligibility while protecting assets that will meet the supplemental needs of the person with a disability. The SNT can pay for these additional needs. Money from the trust cannot be distributed directly to the person with a disability. Instead, it must be distributed to third parties to pay for goods and services to be used by the person with a disability.
The following are examples of what an SNT may pay for:
- Automobile/Van
- Accounting services
- Acupuncture / Acupressure
- Appliances (TV, VCR, stereo. Microwave, stove, refrigerator, washer/dryer)
- Bottled Water or water service
- Bus pass/public transportation costs
- Camera, film, recorder and tapes, development of film
- Clubs and club dues (record clubs, book clubs, health clubs, service clubs, zoo, Advocacy Groups, museums)
- Computer hardware, software, programs
- Internet service
- Conferences
- Courses or classes (academic or recreational) including supplies
- Curtains, blinds, drapes and the like
- Dental work not covered by Medicaid, including anesthesia.
- Down payment on home or security deposit on apartment.
- Dry cleaning and/or laundry services
- Elective surgery
- Fitness equipment
- Funeral expenses
- Furniture, home furnishings
- Gasoline and/or Maintenance for automobile
- Haircuts / Salon services
- Holiday Decorations, parties, dinner dances, holiday cards
- Home alarm and/or monitoring/response system
- Home improvements, repairs and maintenance (not covered by Medicaid), including tools to perform home improvements, repairs and maintenance by homeowner
- Home Purchase (to the extent not covered by benefits)
- House cleaning / maid services
- Insurance (automobile, home and/or possessions)
- Legal Fees/Advocacy
- Linens and towels
- Massage
- Musical instruments (including lessons and music)
- Non-food grocery items (laundry soap, bleach, fabric softener, deodorant, dish soap, hand and body soap, personal hygiene products, paper towels, napkins, Kleenex,toilet paper, any household cleaning products)
- Over the counter medications (including vitamins and herbs, etc.)
- Personal Assistance Services not covered by Medicaid
- Pet and pet’s supplies, veterinary services
- Physician specialists if not covered by Medicaid
- Private counseling if not covered by Medicaid
- Repair services (appliance, automobile, bicycle, household, fitness equipment)
- Snow removal/Landscaping/Lawn Service
- Sporting goods/equipment/uniforms/team pictures
- Stationary, stamps, cards, etc.
- Storage Units
- Telephone service and equipment, including cell phone, pager, etc.
- Therapy (Physical, Occupational, Speech) not covered by Medicaid.
- Tickets to concerts or sporting events (for beneficiary and an accompanying companion)
- Transportation (automobile, motorcycle, bicycle, moped, gas, bus passes)
- Utility bills (direct TV, cable TV, electric, heating)
- Vacation (including paying for personal assistance to accompany the beneficiary)
How is an SNT set up?
The laws governing trusts are hard to understand and change often and from state to state. New laws have considerably tightened the eligibility criteria for receiving government benefits and thus have affected many aspects of the way SNTs are drawn up. Creating a SNT requires detailed planning by an attorney knowledgeable in special needs planning.
SNTs must be established by one of the following:
- court,
- parent,
- grandparent,
- legal guardian/conservator.
If the trust is “self-settled”, the trust must be unchangeable with regard to the following provisions:
- the trust must only be for the benefit of the disabled beneficiary and
- the trust must provide an automatic duty to repay government benefits upon the death of the beneficiary.
Evaluating SNTs
The Social Security Administration and the state Medicaid agencies, review trusts created for individuals with disabilities who receive government benefits. If the individual has the legal authority to revoke the trust and use the principle of the trust to meet his or her needs for food, clothing or shelter, it will disqualify the individual from government benefits.
Managing the SNT
Having an SNT requires a named trustee. A trustee is the manager of the trust and has discretion to use trust proceeds provided for the needs of the individual with a disability. The SNT should be drafted to give direction to the trustee in how to use the resources for the individual’s needs. The trust should be drafted to adjust to unforeseen circumstances, such as to allow trustees to be changed or removed. After the death of the individual with a disability, the trustee oversees the final arrangements and the SNT usually ends.