A special needs trust is usually set up for a disabled child or adult. The trust is designed to benefit the child or adult in a way that does not disqualify them from receiving need-based government benefits such a Supplemental Security Income (SSI) or Medicaid.
Special Needs Trusts can be used if the child or adult has a severe physical or mental disability and government benefits would be lost if they received an inheritance or lawsuit settlement.
If the parent’s or grandparent’s estate planning provides that the disabled child’s share of the estate is distributed to a Special Needs Trust for the benefit of the disabled person, the Medicaid or SSI benefits can be protected.
Once a Special Needs Trust is in place, Medicaid and SSI will pay for medical expenses and basic living costs for the disabled person. The assets in the Special Needs Trust can then be used to supplement the “special needs” of the disabled person. This could include allowing them to travel or take vacations.
A Special Needs Trust can be a great relief to clients in knowing that the child or adult’s inheritance will not be consumed in paying for medical expenses and that their government benefits will be protected.