What Is a Special Needs Trust?

The Chamberlain Law Firm

Any parent of a special-needs child knows how useful government benefits such as Medicaid, Supplemental Security Income, or housing assistance could be in contributing to treatment and care costs. In order to qualify for these benefits, a parent must verify their income is below a certain amount by passing a stringent assets test. It is important to note that an inheritance left to a special-needs child which places them even one dollar over the eligibility threshold could disqualify them from receiving benefits. 

A common misconception is that the best way to qualify for these government programs is to disinherit your child in order to separate them from your assets. Although disinheritance does accomplish the goal of maintaining eligibility for benefits, it is not an optimal plan because SSI or Medicaid income alone is not enough to support a child with special-needs for the duration of their life. 

How does a parent leave money for special needs care without preventing their child from receiving government aid? The answer lies in a Special Needs Trust. Think of a Special Needs Trust, also known as a Supplemental Needs Trust in New York, like a basket that holds assets for the benefit of a special-needs child without making the child the owner of the assets. Your loved one will not have to report these assets when they apply for government benefits.

Generally, the parent appoints a trustee who will direct the funds in the trust to cover various costs associated with raising a special-needs child. Initially, this duty falls on the parent. However, the Special Needs Trust can be designed so that a trusted friend or family member can succeed the parent as a trustee in the event of their cognitive decline, disability or death. A prudent parent may even elect to hire an experienced New York probate attorney as a professional trustee in order to make sure the provisions of the trust are carried out correctly and in a timely fashion. Alternatively, an experienced attorney can assist the trustee in executing their duties.

The goal is for the funds in the Special Needs Trust to be an addition to Medicaid or SSI rather than replace it. Typically, government benefits are used to cover medical and treatment costs. On the other hand, the funds in Trust pay for expenses relating to enhancing your child’s quality of life such as recreational activities, specialized education, therapy and residential or vehicular modifications. Your estate planning attorney can ensure that your funds are managed properly.

Many parents worry they do not own enough liquidable assets to create a Special Needs Trust. Keep in mind, a Special Needs Trust can receive life insurance payouts that could fund the trust with enough money to provide for a special-needs child. 

If you want to learn more about creating a Special Needs Trust, contact our experienced New York estate planning attorney today to discuss your options. Please contact us at thechamberlainlawfirm.com/contact-us or call (201) 249-6716. For more trusts & estates tips and tricks, go to The Chamberlain Law Firm Insights Articles.

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