What Is a Special Needs Trust?
A Special Needs Trust is a powerful tool that allows individuals with disabilities to receive financial support without affecting their eligibility for government benefits. Many individuals with special needs or disabilities rely on programs like Medicaid and SSI, which both have strict income and asset limits. Individuals who inherit a great deal of money or receive a large financial gift may lose eligibility for these benefits. However, with an SNT, those living with disabilities will be able to avoid this problem and continue to receive these benefits. Here is how an SNT works:
- The purpose of an SNT is to supplement - not replace - public benefits that enhance the beneficiary’s quality of life.
- A trustee is appointed to manage and disburse the assets of the trust according to the instructions outlined in the trust document.
- Funds can be used for a number of different purposes, including educational costs, medical expenses that are not covered by Medicaid, recreational activities, or any other things that may improve the beneficiary’s quality of life and well-being.
- The assets within an SNT are well protected and are not considered a part of the beneficiary’s personal resources, which is what helps to preserve their eligibility for government benefits.
There are different types of Special Needs Trusts available, such as a first-party, third-party, or pooled trust. Each type of trust serves a different purpose, and choosing between them ultimately depends upon the source of the funds and the needs of the beneficiary. Speaking with a trusts attorney in Denver will allow you to explore all of your different options and decide which type of trust is best for you. To speak with one of our devoted attorneys, call the team at Evans Case today.
Who Are Special Needs Trusts Designed For?
An SNT is typically established for individuals with certain disabilities, those who are eligible for government benefits, or for those who are unable to manage their assets independently. There is a wide range of disabilities that will qualify an individual to receive benefits and make them eligible for a Special Needs Trust. Disabilities can be physical, developmental, or mental health-related. Individuals who have suffered traumatic brain injuries (TBIs) or have cognitive disabilities like Alzheimer's or dementia are also eligible for an SNT.
Some further examples of conditions that qualify for an SNT include:
- Autism Spectrum Disorder
- Cerebral Palsy
- Down Syndrome
- Spinal Cord Injuries
- Severe Mental Illness
For individuals with disabilities, government benefits are commonly a primary source of financial support for needs such as health care, housing, and daily living. However, if an individual receives an inheritance or any sudden influx of money or assets, their eligibility for these benefits could be compromised. An SNT helps ensure that the assets within are used to enhance the beneficiary’s well-being or quality of life.
To see how our dedicated team of trust attorneys can help you and your family prepare for the future, contact us today. The lawyers at Evans Case have a wealth of experience crafting and establishing trusts and we understand how important it is to take care of your loved ones. Call us today to schedule a consultation and see how we can offer our assistance.
Benefits of a Special Needs Trust
Setting up a Special Needs Trust can provide a number of benefits for both the beneficiary and the family members involved. Some of the key advantages of an SNT include:
- Preserving Eligibility for Government Benefits: As we have discussed, one of the central purposes of an SNT is to help the beneficiary preserve their eligibility for programs like Medicaid and SSI. With an SNT, beneficiaries will still have access to these benefits while receiving financial support from the trust. Without an SNT, an individual may lose access to these benefits if their assets exceed a set limit.
- Improved Quality of Life: Another primary goal of a Special Needs Trust is to help cover the expenses for a wide range of services that ultimately work toward enhancing the beneficiary’s quality of life. This may include things like recreational activities, personal care, or specialized therapy. All of these are examples of things that would contribute to the beneficiary’s happiness and improved well-being.
- Financial Security: Depending on how the SNT is structured, it may be able to provide financial support regularly throughout the beneficiary’s lifetime. This can prove beneficial in situations where a primary caregiver or family member is no longer able to provide support for the beneficiary.
- Protection from Creditors: Another benefit of an SNT is that the assets are shielded from creditors. This is particularly useful because oftentimes individuals with disabilities are vulnerable to financial exploitation. Because the assets in the trust are managed by a trustee, the beneficiary does not have to worry about their funds being misused.
- Peace of Mind: Finally, an SNT provided peace of mind for families of those with disabilities. A Special Needs Trust allows families to rest assured knowing that their loved ones are being properly cared for and supported even after they are gone. An SNT provides long-term financial support that ensures the beneficiary’s needs are met.
To discuss further about how a Special Needs Trust could be right for you and your family, reach out to our team of estate planning attorneys today. Our firm is dedicated to crafting and personalizing trusts that work for you and your loved ones.
How Is an SNT Different From a Regular Trust?
Just like a standard trust, an SNT is designed to help manage assets effectively and provide financial support to a beneficiary. However, there are some central differences that distinguish an SNT from a regular trust.
- Intent: Whereas a regular trust is generally set up to distribute assets or provide financial assistance to a designated beneficiary, a Special Needs Trust specifically aims to preserve a beneficiary’s access to government programs and benefits. While both types of trusts provide security and assistance to the beneficiary, an SNT is primarily focused on retaining these benefits for the beneficiary.
- Assets: With a regular trust, the beneficiary may have some level of control over the assets. However, the beneficiary will not have direct access to the trust funds in an SNT. This is crucial in order to maintain eligibility for public benefits.
- Disbursement: In an SNT, the trustee must be careful to only disburse funds for items or services that are considered “supplemental.” If the trustee uses the funds to provide for “basic support” like food or housing, the beneficiary’s eligibility for benefits may be impacted.
- Legal Requirements: Special Needs Trusts must be set up in a way that comply with state and federal regulations regarding Medical and SSI. Regular trusts will not be subject to this criteria.
- Trustee Responsibility: The trustee of a Special Needs Trust has the fiduciary duty to ensure that any disbursements do not negatively impact the beneficiary or their eligibility for public benefits. This means that the trustee of an SNT must be knowledgeable and have a firm understanding of the roles and responsibilities of special needs planning.
Speaking with a qualified attorney is a great way to help decide if an SNT is right for you and your loved one. For those living with special needs or other disabilities, an SNT can be a great way to secure financial support while maintaining eligibility for Medicaid and SSI. As we mentioned above, there are certain legal requirements that need to be met when drafting the trust. We strongly recommend that you consult with one of the devoted trust attorneys at Evans Case before making any major decisions. We are here to help make sure that your loved ones living with disabilities will be provided for and taken care of even after you are gone.
Requirements for Establishing a Special Needs Trust
Establishing a Special Needs Trust is more than just creating a basic legal document. Rather, there are specific requirements that must be met to certify that the trust complies with both state and federal law.
- A Special Needs Trust is almost always irrevocable and must clearly intend to supplement rather than replace public benefits. A trust document should include detailed instructions about how the funds in the trust should be managed and disbursed.
- The trust must also clearly identify the person who is creating the trust (the grantor), the person who will be benefiting from the trust (the beneficiary), and the individual responsible for managing the funds within the trust (the trustee).
- It is important to fund the trust with care so as to not affect the beneficiary’s eligibility for benefits. The trust may be funded through personal assets, inheritances, or insurance proceeds.
- A first-party SNT will need to include a Medicaid payback provision, which requires any remaining assets be reimbursed to the state for Medicaid expenses incurred upon the beneficiary’s death.
It is important to make sure that the trust is structured in compliance with Colorado law and federal regulations. If a trust is found to not be in accordance with state and federal laws, the trust may be invalidated and put the beneficiary’s benefits at risk. To ensure that your SNT is structured properly and is legally sound, consult with the experts at Evans Case. For more information about how our attorneys are able to help you establish an SNT that works for you and your family, call us today.
Planning for a Special Needs Trust
Planning for a Special Needs Trust involves more than just setting up the trust itself. Families of those with disabilities should consider the long-term needs and goals of the beneficiary and consider how the trust may interact with other areas of their estate plan. Some important things to consider before establishing your SNT include:
- Future Expenses: Identifying the future needs of the beneficiary will allow families to accurately estimate their financial needs. The process should involve considering expenses like medical care, housing, education, recreational activities, and more.
- Choosing the Right Trust: There are a number of different trusts available, and not all Special Needs Trusts are the same. Consider consulting with an estate planning attorney to consider the pros and cons of a first-party SNT, third-party SNT, or a pooled SNT. Each one offers their own unique benefits, and speaking with an attorney will help you decide on an SNT that effectively ties into your estate planning goals.
- Setting up a Letter of Intent: A letter of intent is an informal document that serves as a guideline for future trustees, caregivers, or other family members who may be involved in providing care for the beneficiary. This is not a legally binding document, though it can provide some incredibly valuable insight and information as to how the beneficiary prefers to receive care and their long-term goals.
It is important to address these areas before creating your Special Needs Trust. Taking these into consideration, families can carefully create an SNT that protects the beneficiary and their financial resources, as well as ensuring that their medical, personal, and social needs are all met throughout their lifetime.
How Evans Case Can Help With Your Special Needs Trust
Our firm has the experience to confidently guide you through the process of an SNT with care and compassion. We are here to help you precisely craft your Special Needs Trust to meet the goals of you and your family. Evans Case is committed to helping families care for their loved ones with disabilities, offering our expertise to help beneficiaries plan for their futures and meet their long-term goals. We understand the importance of providing for family, and our lawyers are here to help every step of the way. For more information about how our Denver attorneys can help with your Special Needs Trust, give us a call today.
