Special Needs Trusts

One of the greatest concerns of our disabled clients and their families is ensuring that they are able to maintain their eligibility for public benefits.  At Machado & Carden, we can assist you in creating a family estate plan which will make sure that an inheritance intended for a disabled individual remains available for that person's benefit without impacting their ongoing eligibility for Medicaid or Supplemental Security Income (SSI).  A Supplemental Needs Trust (also known as a Special Needs Trust) can be the perfect tool to meet these objectives. 

A supplemental needs trust or special needs trust is a trust created for a disabled individual to pay for comforts and luxuries, such as education, recreation, counseling, and medical attention, that could not be paid for by public assistance funds. The funds held in the trust are not considered in determining the beneficiary's eligibility for public benefits, such as Medicaid, SSI, or public housing.

Very often supplemental or special needs trusts are created by a parent or other family member for a disabled child (even though the child may be an adult by the time the trust is created or funded). A disabled individual can also create the trust himself or herself, depending on the program for which he or she seeks benefits. Medicaid and SSI are the most restrictive programs in this regard, making it difficult for a beneficiary to create a trust for his or her own benefit. But even Medicaid and SSI have a "safe harbor" allowing for the creation of a supplemental needs trust with a beneficiary's own money if the trust meets certain requirements. This is sometimes called a "(d)(4)(A)" trust, referring to the authorizing statute.

Each public benefits program has its own restrictions that must be complied with in order to ensure the recipient's continued eligibility for public benefits.  Consequently, it is critical to understand how trust distributions could impact benefits. 

For instance, an SSI recipient would lose one dollar of his of her SSI benefit for each dollar paid directly to the recipient from the trust. In addition, trust payments for food or housing for the beneficiary are considered "in kind" income and, again, the SSI benefit will be cut at a rate of one dollar for every dollar of value of such "in kind" income. Some attorneys draft the trusts to prohibit the trustee's discretion to make such payments. Others do not limit the trustee's discretion, but instead counsel the trustee on how the trust funds may be spent, permitting more flexibility for unforeseen events or changes in circumstances in the future. The difference has to do with philosophy, the situation of the client, and the amount of money in the trust.

To learn more about how we may be able to help you with your special needs trust matters, contact a member of our legal team at Machado & Carden today.