If you have a special needs child you have likely taken great care to ensure that your child will be well protected when he or she reaches adulthood. Whether or not your child is able to care for himself/herself, the law will consider your child to be a legal adult at some point in time. One concern when that happens is that he or she continues to be eligible for state and federal assistance programs such as Medicaid and SSI. Eligibility for these programs is based, in part, on the recipient’s income and assets, meaning that your child cannot own significant assets. This can become a problem if a well-meaning relative leaves your child a gift in his or her Last Will and Testament. Protecting an inheritance with a special needs trust is one way to handle a situation such as this should it occur.
As you likely know, your special needs child’s eligibility for programs such as Medicaid and SSI must be reviewed on a regular basis. When you re-apply for those programs you will have to divulge any assets your child owns. If your child’s resources exceed the program limits your child’s benefits will be cut off, potentially causing serious problems. Although you may know this, a well-meaning relative may not. Often, this results in a relative living a special needs child an inheritance intended to help defray the costs of therapy, medical expenses, and daily living expenses. While this is a wonderful thought, leaving money or other assets directly to a special needs child can cause the child to lose eligibility for federal benefits. Creating a special needs trust can be the solution if you find yourself in this position.
A special needs trust, also referred to as a supplemental needs trust, is a specific type of trust intended to guard assets for the benefit of a special needs individual. An inheritance, for instance, could be transferred into a special needs trust. Assets held in a special needs trust may be used to help pay for things that state and federal benefit programs do not pay; however, the rules regarding what can be paid for by a special needs trust are very specific. Likewise, the language that must be used to create a special needs trust that will be recognized as such by federal benefit programs is also very specific. If you believe that a special needs trust may benefit your child by protecting an inheritance, consult with your estate planning attorney.
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