Special Needs Planning and Advising for Disabilities

What is a Special Needs Trust?

A special needs trust (“SNT”) can be created for a person who has special needs or is disabled and requires governmental assistance for his or her care. A SNT provides benefits to a beneficiary that are beyond the means of the governmental assistance and will also protect the beneficiary’s eligibility for programs such as for Supplemental Security Income (SSI) or Medicaid. This type of planning is also important for an anticipated disability, even if your loved one does not currently require any government assistance.

Who can create a Special Needs Trust, and why should I consider it?

A SNT can be created by a third party or self-settled. If a child has a disability, a parent or grandparent will want to create a SNT to ensure the child receives continuous care after the benefactor’s death. This will also be true if a child has an aging parent and wants to ensure there are additional benefits for the parent should anything happen to the child. If a recipient of SSI or Medicaid has gone through the extensive process and expense to qualify for benefits and then receives even a small inheritance, the recipient will likely be disqualified from the government program and will need to endure trouble and expense to requalify for continued care. This can cause substantial detriment to a person requiring regular care as well as to the loved ones assisting them with his or her care. Assets held in a SNT are not considered property of the beneficiary, and therefore do not interfere with government assistance. The trustee for a SNT should seek guidance from a qualified attorney to comply with all SSI and Medicaid requirements because certain distributions from the trusts can affect government benefits which can be easily avoided with informed decisions.

D-4A Trusts

Self settled trusts, sometimes referred to as D-4A trusts after the Federal Code Section 42 U.S.C. 1396 (d)(4)(A) which provides guidance and authority for the establishment of such trusts, are often funded with an inheritance or proceeds from legal settlements or lawsuits. The trust must be created by a parent, grandparent, legal guardian, or court. A self settled trust differs from a SNT created by a third party because the statute requires reimbursement to the state for medical assistance. If the medical assistance provided during the beneficiary’s life does extinguish the trust assets, then upon the death of the beneficiary, any remaining trust assets may pass to remainder beneficiaries. The distinguishing difference between a self-settled trust or a trust created by a third party is whether or not the beneficiary had the right to possess the assets before the trust was established.

Why Choose Kristin Dittus?

Special needs trusts must be carefully drafted by someone familiar with the subject matter and tailored to the unique requirements of each beneficiary, and then administered by an informed trustee, otherwise there is a risk the beneficiary will lose government benefits necessary to his or her care.