Several clients ask what they can do for a child who qualifies for means-based government assistance due to a disability. The simple answer is a Special Needs Trust, sometimes referred to as a Supplemental Needs Trust. The primary purpose of a Special Needs Trust is to shelter assets that will sustain an improved quality of life for the beneficiary, with provisions that maintain the beneficiary’s eligibility for governmental benefits.
There are two main types of special needs trusts, a Self-Settled Special Needs Trust and a Third Party Special Needs Trust. There are several rules that apply to Self-Settled Special Needs Trusts and we want to call your attention to a few of them:
(1) The trust must be funded by assets that belong to the disabled beneficiary such as an inheritance or proceeds from a personal injury claim;
(2) The trust must be established for the benefit of that child by a parent, grandparent, legal guardian or a court;
(3) The trust must be irrevocable; and
(4) The trust must contain a Medicaid payback provision.
The second type of Special Needs Trust is the Third Party Special Needs Trust. Some of the rules that apply to this type of trust are:
(1) The trust can receive contributions from multiple sources such as parents, grandparents, friends and siblings (but not from the disabled beneficiary); and
(2) The trust does not contain a Medicaid payback provision. Notice that a Third Party Special Needs Trust allows friends, parents, grandparents and other family members of a disabled beneficiary to make contributions to the trust. The contributions can be made during the life of the donor, or the donor can leave money to the trustee of the Third Party Special Needs Trust at the death of the donor, and the contributions will not cause the disabled beneficiary to be disqualified from means-based government assistance.
Our clients want to make sure their disabled child will have adequate medical and dental care and assistance throughout their life. They also want to make sure their child will be able to continue with life in a comfortable and dignified manner. The Special Needs Trust is the simple answer, but the Trust requirements are complicated. A qualified Estate Planning attorney can assist you with setting up a Special Needs Trust to make sure your child will continue to receive assistance, as well as supplemental help from the Trust as needed.
JensenBayles, LLP provides a broad spectrum of legal services. Thomas J. Bayles has been actively providing advice in the areas of trusts, wills, probate and tax planning in the St. George market for over 18 years. Please visit our web site www.jensenbayles.com or call 435-674-9718 and ask for Thomas J. Bayles or Phillip G. Gubler.
The information in this article is for educational purposes only and is not intended to be construed as legal advice.