Special Needs Trusts Provide Extra Help for Loved Ones with Disabilities

If you have a relative with special needs such as a disabling injury or mental and physical limitations, you may wish to help them with their expenses by giving them financial support. However, Medicaid and other government benefits for those with special needs are available only to people with income below certain levels. Any assets possessed or received by these individuals may make them ineligible for their benefits.

A special needs trust (also called a supplemental needs trust) allows those with special needs to preserve their financial resources while still being eligible for public benefits. The creator of the trust (called the grantor) places assets into the trust for the benefit of the special needs child or adult (the beneficiary). The grantor also names a trustee, the person or entity who will manage the assets of the trust for the beneficiary according to specific instructions.

When considering this type of arrangement for a family member, it is important to consult with a knowledgeable estate planning attorney to make sure you are compliant with the applicable laws.

A special needs trust becomes the owner of the beneficiary’s own property and income, including funds from a gift or inheritance or the proceeds of a lawsuit over the event that resulted in the beneficiary’s disability. Importantly, the trustee must be established by a third party who usually is also the trustee. The beneficiary must have relinquished all control over the property.

A Miller Trust is a similar type of trust that is often used for the benefit of seniors and disabled individuals. Also known as a qualified income trust, it allows them to lower their incomes and thus qualify for extended health benefits such as the Arizona Long Term Care System. Income in excess of the eligibility level for such programs is paid into the trust during the individual’s lifetime and those funds go to the state government upon the individual’s death.

Still another option is a nonprofit pooled-income special needs trust, which contains funds and other assets that never belonged to the beneficiary. This allows family members and others to invest funds in a nonprofit organization that pools them and uses them to pay for the medical or long-term-care costs of several beneficiaries. The payouts for these trusts do not affect the recipients’ eligibility for government benefits like Medicaid.

The Law Firm of Joseph M. Udall, PLC. in Mesa, Arizona has assisted Arizonans with estate planning for over 20 years. If you are considering setting up a special needs trust for a loved one, contact us at 480-500-1866 or contact us online. Saturday and evening appointments are available.