Did you know that October is National Special Needs Law month?
Special Needs Law is the area of law dedicated to assisting disabled individuals and their families with legal planning designed to help improve their quality of life. Sometimes, this can involve creating certain types of trusts designed in such a way that their contents are not counted against public benefit eligibility. This type of trust, known as a special needs trust, can help a disabled individual preserve their Medicaid or SSI benefit eligibility, even if they receive an inheritance or a settlement. It can also be used to help a disabled individual qualify for those programs even if they are not presently financially eligible.
The government imposes certain requirements and restrictions on special needs trusts in order for their assets not to be counted against public benefit eligibility. For example, the trustee of the special needs trust must use the trust’s assets for the sole benefit of the disabled individual. The beneficiary must be disabled according to Social Security’s definition of disability, and (for certain types of special needs trusts) the disabled beneficiary must be under age 65 at the time the trust is established. Most importantly, the trustee must be very careful when it comes to how the trust money is used – if the trustee duplicates what the disabled beneficiary’s public benefits provide, then this may cause the trust assets to be countable.
There are different types of special needs trusts.
A “first party” special needs trust is one created for a disabled beneficiary using the disabled beneficiary’s own money. These trust can either be “individual” or “pooled.” An individual first party special needs trust is one created specifically for that disabled beneficiary, while a “pooled special needs trust” is a first party special needs trust that is administered by a non-profit trustee for the benefit of multiple disabled beneficiaries, each with their own sub-account. First party special needs trusts must contain government reimbursement provisions such that public benefits paid by the State are reimbursed upon the trust’s termination or the beneficiary’s death or, in the case of certain pooled trusts, rather than reimbursement remaining funds can be absorbed into the pool to be used for the furtherance of the trust’s non-profit purpose. First party special needs trusts can only be established by a parent, grandparent, guardian, or a court. (Though a disabled individual can join a pooled trust without the intervention or assistance of one of those listed parties).
A “third party” special needs trust need not contain this government reimbursement language, but it is a type of trust that cannot be created by the disabled person – it can only be created by someone else, for the disabled person’s benefit, using that other person’s money (or funds contributed by other third parties). Parents or grandparents, for example, will often pre-plan their disabled child’s inheritance by including third party special needs planning provisions within their own estate plans. That way, the disabled child can receive their inheritance in a way that will not jeopardize their continued public benefit eligibility.
Special needs planning is just about creating trusts. It involves looking at the disabled individual’s circumstances – their daily needs and their plan of care, as well as their financial needs – and developing a holistic plan (which may or may not involve the use of a trust) designed to anticipate and address those needs. Medical, financial, social, and family considerations all must be taken into account. Questions like “if I am not around to make a decision for my child, who will have the legal authority to talk to their doctor?” or “Once I am gone, who will have the ability to take care of my child’s banking, if they cannot handle it for themselves?” must be asked and addressed.
With the implementation of the Affordable Care Act on the near horizon, individuals who were once solely reliant on public assistance will have other insurance choices as no longer will pre-existing conditions be a consideration in the new insurance marketplace. Some disabled individuals may decide to forego their benefits, and the restrictions that go hand-in-hand with them, in favor of previously unobtainable private insurance. Others may decide to continue their benefits, for a variety of possible reasons. Now, more than ever, it is important to consult with a special needs planning attorney. Such attorneys can help guide their clients through the new health care maze.
