People with disabilities qualify for Medicaid and other government benefits based on their finances. You may want to provide a gift or leave an inheritance to a disabled loved one, but doing so directly may affect his or her eligibility.
A special needs trust is a way that you can provide financially for a disabled loved one without affecting his or her benefits eligibility. The assets are the property of the trust itself rather than the beneficiary, so his or her financial status remains intact.
1. What assets can go into a special needs trust?
You can fund a special needs trust with assets that an individual already owns or with assets that you wish to give to the beneficiary as a gift. The point of a special needs trust is that the beneficiary receives the assets a little at a time rather than receiving them all at once. This way, the income will not affect eligibility for government benefits.
2. How can the trustee use the funds?
The trustee is the person in charge of the trust assets. He or she has the authority to decide how to use the funds, but this must be in compliance with the law. The purpose of the special needs trust is to supplement the government benefits that the beneficiary receives. Therefore, it is illegal for your appointed trustee to use the funds for necessities that benefits cover, such as food or housing.
3. What other conditions must a special needs trust meet?
A special needs trust must be irrevocable, which means that changes to the trust are no longer possible after funding it. The beneficiary must meet the legal definition of disability to be eligible for this type of trust.
You can only create a special needs trust for a disabled beneficiary who is under the age of 65. However, you can create the trust any time prior to that point.