Can a special needs trust help your family?

On Behalf of | Feb 2, 2022 | Firm News |

When you begin estate planning, you may start to think of how you will pay for nursing home care if you need it. While Medicaid can cover nursing home expenses, there are certain financial requirements that must be met in order to qualify for benefits. One significant requirement is that you must only have minimal income and assets to qualify for Medicaid. Does that mean you have to impoverish yourself leaving nothing to pass on to your heirs? Not necessarily. A special needs trust may allow you to set aside funds while still qualifying for government benefits like Medicaid.

What is a special needs trust?

A special needs trust is a legal instrument that allows a person who is physically or mentally ill or disabled to have access to funds while still qualifying for government benefits. It creates a fiduciary relationship in which funds are placed in the trust and are overseen by a trustee. Assets in a special needs trust are not counted for Medicaid qualification purposes as long as they are not used to pay for specific expenses including food and shelter. The trust covers a certain percentage of the person’s financial needs that cannot be paid for with government benefits. For example, it is possible to use funds from a special needs trust to pay for medical costs, caretaker payments and transportation costs. Special needs trusts are irrevocable and must be established before the beneficiary reaches age 65.

Special needs trusts and assets

It is important to note that assets belonging to the individual benefiting from it may be subject to Medicaid’s repayment requirements. However, assets placed in a special needs trust by a third party such as a parent or an adult child are not subject to Medicaid’s repayment requirements. Third parties funding a special needs trust can dictate how these funds are to be spent.

Special needs trusts are complex legal instruments that must be precisely worded in order to be effective. Any ambiguities can make the trust invalid. Many people considering a special needs trust as a way to protect their assets will work with a professional to ensure the final document will meet their needs.