Elder Law: Special needs trusts enhance lives of those with disabilities
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In a prior column, we talked about Bill and Susan and their son, Sam, who has disabilities (special needs) and requires assistance with various activities of daily living. We discussed the option of Bill and Susan establishing a special needs trust during their lifetimes so that Sam's inheritance could remain intact within the trust someday to provide for his needs. This is called a "third party special needs trust" (established with funds other than those of the beneficiary of the trust).
The key function of that trust is to allow Sam to enjoy the benefits of the funds without disrupting his eligibility for important needs-based benefits such as Supplemental Security Income (SSI) and Medicaid (called Medical Assistance in Pennsylvania).
While establishing a special needs trust is proactive, what happens if a disabled person does not have a trust established in advance of receiving assets, especially where those assets are that person's?
Let's say Sam was injured as a result of medical malpractice or an auto accident. What if his uncle, Paul, who had no children, left his entire estate payable to Sam? This needs special attention to help identify the options available to preserve Sam's benefits while avoiding wasting the assets he receives and the possible loss of benefits.
Fortunately, under both federal and state law, there are protections afforded to disabled people to protect their assets while maintaining their benefits. The "third party special needs trust" could do this.
While the term "special needs trust" is loosely used to describe a trust which provides a disabled beneficiary additional and supplemental funding to pay for her/his care, another special type of trust actually allows the individual to use his own funds rather than funds funneled through a trust created (frequently) by parents.
First Published October 23, 2011 12:00 am
