What is a special needs trust?

Estate Planning Word CloudA special needs trust is a type of trust used when a person wants to provide for the needs of a disabled individual in a way that will not disqualify him for government benefits. It is also known as a supplemental needs trust. It can be a good way for you to provide for a family member upon your death without jeopardizing his Supplemental Security Income (SSI).

Needs of a Disabled Loved One That You Can Provide for in a Special Needs Trust

Many disabled individuals cannot work due to their disability and receive monthly income and other benefits, such as SSI, Medicaid, and section 8 housing. In order to be eligible for these benefits, they must meet certain eligibility requirements, including the amount of income they can have and assets that they can own. For example, a person receiving SSI benefits currently can only have $2,000 in assets. However, they are also allowed to own a home, a vehicle, household goods and furnishings, burial plot, and life insurance policy of up to a face value of $1,500.

The SSI benefits a disabled person receives are to pay for his basic food, shelter, and clothing needs. To ensure that a disabled loved one continues to receive his monthly SSI benefits, a special needs trust cannot be used to pay for his basic needs. However, it can be a way to provide for a disabled person’s discretionary needs. Examples of what is permitted include:

  • Summer camp or extracurricular activities for a child
  • Airline tickets
  • Vitamins and grooming supplies
  • Television, kitchen appliances, and other household goods
  • Funeral and burial expenses

What Clauses Should Be in a Special Needs Trust?

A special needs trust can be established in a person’s will or a trust. In order to be effective, a special needs trust should contain certain provisions. Here are some necessary clauses:

  • Provide that the disabled person cannot demand distribution of the trust funds
  • Prohibit the use of trust funds for the individual’s basic needs
  • Specify that it is a discretionary trust to be used to supplement benefits that the person is receiving
  • State that the trust should not be administered in a way that jeopardizes his benefits

Do you have a family member who is disabled that you want to provide for upon your death? Our experienced estate planning attorneys are here to discuss your concerns and options that will not put his government benefits at risk. Schedule your free consultation by calling our Norfolk office or filling out our convenient online form.