Special needs trusts were authorized by Congress through the Omnibus Budget Reconciliation Act of 1993 (OBRA 93). A “special needs trust” describes any trust intended to provide benefits without causing its beneficiary to lose public benefits he or she is entitled to receive. There are two general categories of special needs trusts: self-settled and third party.
It’s the same as a special needs trust. Some lawyers simply prefer to use the term “supplemental benefits” or “supplemental needs” instead. The terms are interchangeable. They describe the trust’s purpose and are not legally different.
Sometimes a recipient of public benefits receives assets that prevent continued benefits eligibility. In this case, it may be possible – and advisable – to place assets into a special needs trust to regain or continue government benefits eligibility.
Anyone. A third party special needs trust can be established by one person for the benefit of another. The person establishing the trust – called the settlor, grantor or trustor – chooses to make some of his or her assets available for the benefit of the beneficiary with a disability. Third party special needs trusts are often established by parents for their children with disabilities.
Not everyone with disabilities who receives a large tort settlement needs a special needs trust. A trust is usually necessary only if the person is receiving Medicaid , SSI or other means-tested government benefits. Small settlements may not warrant the establishment and administration of a trust. Other ways can be found to shelter the settlement funds. Even if the person is not currently receiving benefits, a trust must be considered if there is a possibility that the person may receive means-tested government benefits in the future.
Special needs trusts can protect different public benefits. Most commonly, special needs trusts are intended to permit Supplemental Security Income (SSI) and Medicaid recipients to receive some additional services or goods.
No. A special needs trust does not itself make public benefits available. Nor does it make it easier to qualify for them. The beneficiary must qualify for the benefits program – either before or after the trust is established. If properly designed, the trust will not cause a loss of benefits – although the level of benefits may be reduced in some circumstances.
These trusts are often established by people who have received an inheritance or personal injury settlement – often from the incident that caused the disability. Sometimes people with pre-existing wealth determine that, upon becoming disabled, creating a special needs trust is to their advantage.
A special needs trust can provide for physical therapy, medications and medical treatment, and transportation. It also may allow for other life-enhancing items, such as education, entertainment, vacations, companionship, furniture and furnishings (such as a television or computer), and some utilities (e.g., cable television and telephone service, but not electricity, gas or water). The general rule is that a trust may not provide the beneficiary with food, or shelter (e.g., rent), or any asset which could be converted into food, or shelter – including cash. If the trust is structured to pay for food, or shelter, the beneficiary’s SSI payments will be reduced. However, with proper trust administration, the basic benefit as well as Medicaid eligibility can be preserved. Distributions of cash to the beneficiary are almost never permitted.
Yes. However, there are some strict SSI and Medicaid regulations affecting the use of special needs trusts (or any third party payment) for shelter. For example, if the beneficiary dies, the home would be subject to the Medicaid payback provision and the home may be lost. Before buying a house through the trust, consult an experienced lawyer knowledgeable about the intricacies of federal benefit programs.
Yes – but insurance is often difficult to arrange. It’s usually better for the trust to lease the motor vehicle.