When preparing your will with the intention of leaving money or property to a family member with special needs, it’s vital to consider the impact of such bequeathals on their ability to receive assistance from important government programs, like Supplemental Security Income and Medicaid. There are also other financial circumstances beyond wills that could impact the ability of a person with special needs to receive those benefits, such as after receiving a settlement from a lawsuit. Government benefits aside, you undoubtedly want to have a clear plan that will protect your family member from financial abuse, and keep only their best interests in mind.  Often, the best course of action is to create a special needs trust for the beneficiary.

What Are Special Needs Trusts?

A special needs trust will allow the beneficiary to continue receiving SSI and Medicaid along with the contents of the trust, as it is not managed by the beneficiary, but by a trustee. A trustee is usually a close family member, but there are other choices, such as a professional trustee. The trustee will allocate money to the beneficiary’s needs. These needs encompass all aspects of the beneficiary’s lifestyle, including medical expenses, leisure activities, education, personal expenses, and beyond. With this level of responsibility, choosing a trustee is clearly of the utmost importance, and you should select this person only after careful thought. The special needs trust will continue until the depletion of funds, or at the death of the beneficiary.

Types of Special Needs Trusts

There are unique rules depending on the type of special needs trust. Your choice of trust will depend on the individual circumstances of the person with special needs.

First-Party Special Needs Trust

If the trust is to be funded with income that comes from the person with special needs, usually from a settlement or direct inheritance, this is known as a first-party special needs trust. There are many requirements that must be met for this kind of trust, especially for this trust to co-exist with Medicaid and SSI. One noteworthy requirement is that Medicaid must be reimbursed after the death of the beneficiary.¹

Third-Party Special Needs Trust

The third-party special needs trust, on the contrary, is not and cannot be funded with money that belongs to the beneficiary. This kind of funding may come from an inheritance, as well as from a life insurance policy. When a third-party special needs trust is formed, there is no requirement to reimburse Medicaid when the trust is complete. You will decide in the trust document how you would like any remaining funds distributed if the beneficiary dies before all funds are depleted.   

Pooled Trust

Another type of special needs trust is a pooled trust. This type of trust is created by a non-profit organization, wherein the assets of multiple beneficiaries with special needs are pooled together in one trust. However, each individual retains their own account. A pooled trust may be an option to consider if the amount of money available to the beneficiary is low. You may also simply like the idea of helping others with special needs, along with your beneficiary. ²

Since each of these types come with their own complexities, pros, and cons, seeking guidance from the team at Neurobehavioral Associates is highly advised. We can help you locate pooled trusts in Maryland, and guide you through understanding any of the special needs trusts.

Establishing a Special Needs Trust

Special needs trusts must be worded in a very specific way to ensure legality.  A special needs trust will clarify in the document the purpose of the trust, which is to serve as a kind of additional support for the beneficiary apart from the essential services of Medicaid and SSI. For an accurate and appropriate special needs trust, the best step to take is to contact a lawyer for individual counsel and for the creation of the document. Neurobehavioral Associates can also assist you with locating a qualified lawyer.

Protecting Your Family Member with Special Needs

Regardless of type chosen, or the reason behind the choice, a special needs trust provides important financial protections for beneficiaries. We have a vast network of resources, and can refer you to an appropriate lawyer or service. Contact Neurobehavioral Associates for assistance navigating this extremely important process.  

References:

  1. The Voice® Newsletter. (n.d.). Retrieved March 13, 2018, from https://www.specialneedsalliance.org/the-voice/your-special-needs-trust-snt-defined-2/
  2. What Is a Pooled Trust and How Does It Protect My Family Member? (2009, August 04). Retrieved March 13, 2018, from https://specialneedsanswers.com/what-is-a-pooled-trust-and-how-does-it-protect-my-family-member-13590