There are many types of trusts and each is a different tool used to manage and protect the assets of a trust as laid out by a Grantor so that there is a benefit to beneficiaries. This blog covers the design and uses of a Special Needs Trust

What is a Special Needs Trust?

A special needs trust is a handy tool that helps to protect the beneficiary’s eligibility for governmental benefits.  Assets owned by a special needs trust for the benefit of a beneficiary are not deemed to be owned or “available” to the beneficiary, thus safeguarding their eligibility for those social programs. The trust must be set up in a specific way so that the beneficiary does not own the assets of the trust.

Many of the social programs, such as Medicaid or Supplementary Security Income (SSI) have eligibility guidelines that do not allow participants in these programs to have very many assets or they may also have an income threshold. Because of these restrictions, a special needs trust is established to safeguard the eligibility of special needs people, for social programs.

How They Work

While you are thinking about estate planning you may consider the special needs trust. They work in a way that helps people with special needs – those with Down Syndrome, Autism, etc. – to remain eligible for governmental programs that provide aid to these people.

1. The Special Needs Trust as a Holding

The trust owns the assets within its holdings. For that reason, the trust can act as an asset protector for special needs people. Because the trust is the owner of the assets within the trust, those assets do not encumber or become income for special needs people. For that reason, those people can remain on governmental programs designed to help them.

2. The Special Role of These Trusts

Special needs trusts address the special needs of the beneficiaries of the trust. They act as a supplement to care needs by paying for healthcare and other services not covered by governmental programs. 

For example, if the beneficiary of the trust must have special medical needs such as sitters or custodians and their governmental programs do not pay for those services, the service can be provided by the trust without the service being considered a form of income for the beneficiary.

In some trusts, where income is not provided by the governmental programs, income may be provided on a limited basis to the beneficiary so long as the amount does not disqualify them from receiving governmental programs.

Estate planning is an important part of the process of providing a safe legacy that supports and nurtures people with special needs. How you set up the trust is critical. The design must include consideration of how governmental programs work and what the restrictions for those programs include.

Contact Dan Kellogg For More Information About Estate Planning

Dan Kellogg provides Estate planning and trust design and implementation to the greater Renton, Washington community. Learn more about setting up special needs trusts by reaching out to our team.