A supplemental or special needs trust for disabled people is designed to provide them funds while preserving their eligibility to receive government benefits. Parents usually set up these types of accounts for their child or any family member with physical or mental health conditions. While the trust controls and owns the assets put into it, it doesn’t compromise the individual’s entitlement to medical coverage from Medicaid and support from Supplemental Security Income (SSI).
How Does It Work?
For starters, setting up a special trust for someone with cognitive or intellectual disabilities involves three people with specific roles. First is a grantor or settlor who creates the account and supplies funds for it.Next is the beneficiary or the person with a disability. The last one’s the trustee. A person appointed as the latter may have more duties than the other two, their role continues aslong as the fund has money and the beneficiary is alive. They’ll need to:
- Manage the money or assets for the receiver of the fund under state law and the terms of the trust
- Use the fund to meet the beneficiary’s needsthat are out of the scope ofgovernment-granted benefits
- Keep meticulous records of all expenses made
- Prepare reports annually as required by Medicaid and SSI
- File state and federal trust tax returns
How Is It Spent?
The trustees must spend the money solely for the beneficiary. They can use trust assets to purchase goods and services to meet the needs of the person with a disability, which includeout-of-pocket medical expensesas well as those for personal care attendants’ services, home furnishings, travel, recreation, vehicles, education, and physical rehabilitation.
Some may ask why the hassle if the trustees can just give the funds to the receiver themselves. The short answer is, they can’t. Giving the money directly to the beneficiary may interfere with their eligibility to receive benefits from the government.
What Are The Different Types?
There are three kinds of special trusts for disabled people, eachtailored to suit the needs of different persons with disabilities.
- A first-party trust holds the assets belonging to the beneficiary. These include an inheritance or a settlement froman accident. When that individual passes away, the remaining assets in the account will be used to reimburse the government’s expenses for their medical care.
- A third-partytrust holds funds from another person who wants to help the beneficiary. What sets this apartfrom its first-party counterpart is that the remaining money can be transferred to other family members.
- Lastly, pooled trusts are run by nonprofit organizations who invest funds from various families within the community or even from across countries. Although the assets are pooled together, the account remains the beneficiary’s.
A trust for a disabled loved one allows family members and other people to contribute assets for the benefit of a person with special needs. Consult a law firm or nonprofit organization to help you start one.