Blog posting written by William Brown
WL Brown Law Office
Trusts and estates planning go hand in hand when it comes to ensuring quality of life for a person with a disability. Life has dealt people with disabilities enough challenges. If you have the means and the motivation to help care for a loved one with disabilities you should know how you can best provide financial assistance without diminishing public assistance. Trusts are frequently used in estate planning and caring for a disabled person is an excellent use, indeed.
What is a trust? A Trust is a legal entity that holds assets for the benefit of the Beneficiary. The Grantor sets up the trust and assigns the Trustee to manage the trust for the benefit of the beneficiary. The trustee also distributes funds from the trust on behalf of the beneficiary. Since neither you, the grantor and source of the money, nor the disabled person, the beneficiary, directly control these assets, the law grants special privileges to the trust, including special tax treatments.
Supplemental And Special Needs Trust
Two types of trusts can be established to benefit a person with a disability by supplementing their governmental benefits: Supplemental Needs Trust and Special Needs Trust. Both types of trusts are intended to provide funds to enhance government disability benefits and protect financial resources.
Supplemental Needs Trust Provides Resources
A Supplemental Needs Trust is created for a disabled beneficiary and supplements public benefits such as Medicaid and Medical Assistance rather than diminishing them. Government benefit programs consider the disabled person’s resources and income to determine eligibility for assistance and the amount of such assistance. Whereas, Social Security and Medical Assistance may provide a basic level of income to a person with a disability, quite often this is not enough. Any income the person earns reduces benefits. Benefit programs also consider the spouse and others obligated to pay any sum to or for the benefit of the trust beneficiary. Outright giving the person money accomplishes little more than reducing benefits.
Supplemental Needs Trust And Quality Of Life
A Supplemental Needs Trust can enhance their quality of life by providing money to supplemental their needs that is not provided by public programs. Before the trustee can make any distributions, the beneficiary must first use the government benefits. A family member may establish a trust for the disabled person without reducing the beneficiary’s Medicaid and other government benefits. Recent changes in federal and state laws provide opportunity to use the disabled person’s own funds in such trusts under certain conditions.
Define Disability For Needs Trusts
A Supplemental Needs Trust qualifies a person as disabled in one of two ways. If the person is defined as disabled under Title II or Title XVI of the Social Security Act, that person qualifies as disabled for this trust. Bottom line, receiving Supplemental Security Income (SSI) or Social Security Disability benefits qualifies the person as disabled. Also, if a person has a physical or mental illness that is expected to last for twelve months or more and it substantially impairs their ability to provide for their own care, they qualify as disabled. This disability can be established by the written opinion of a licensed professional. This diagnosis must also be confirmed by the written opinion of a second licensed professional.
Special Needs Trust Protects Resources
A Special Needs Trust also protects the assets of the grantor and is used to supplement government benefits. This trust is created to ensure that the disabled beneficiary can enjoy the use of property that is intended for their benefit. Whereas, these trusts are often setup for people lacking the mental capacity to handle their own financial affairs, there may be fiscal advantages to this trust. Special Needs Trusts may be setup to receive an inheritance on behalf of a person with a disability. They can be funded from the proceeds of criminal injury compensation, litigation or insurance settlements. Basically, this trust is funded by the beneficiary with their own assets.
State Receives Special Needs Trust Assets
Unlike other trusts, upon death of the grantor, who is also the beneficiary, the state receives all money remaining in the trust up to the amount already paid by the state for benefits like Medical Assistance. Any remaining trust assets go to the persons listed in the trust or a non-profit designated by the grantor. In Minnesota, the trustee of a Special Needs Trust must submit to the Commissioner of Human Services a copy of the trust, an inventory of the trust account assets and the value of those assets annually.
A Special Needs Trust qualifies a person as disabled also in Title XVI of the Social Security Act. In Minnesota, disability may also be established by a State Medical Review Team that uses similar criteria to the Social Security Administration.
Needs Trust Planning Enhances Life For The Disabled
When it comes to ensuring quality of life for a disabled person, trusts and estates planning are powerful tools for good. Having means and motivation to help care for a disabled loved one you now know two effective tools to provide financial assistance without diminishing other benefits. If you have close to you a person with disabilities and you want to enhance the quality of their life, exercise your compassion without wasting your valuable resources. WL Brown Law Office specializes in all things elder law and special needs. We will be honored to discuss your special needs and answer your questions at your convenience. Let’s build a trust relationship by exploring your special needs and supplemental needs together.
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