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Special Needs planning is typically done for an individual with a disability. The reason why it is so important to do Special Needs Planning is to provide for the disabled person and to make sure that they do not lose their governmental benefits should they receive a settlement or an inheritance.
Health care cost for disabled individuals can be astronomical. Receiving immediate assets will put the disabled person at risk of losing governmental benefits like Medicaid and Social Security.
A common element of all Special Needs Trusts (“SNT”) is that the individual must be “disabled” under the Social Security Administration statutory definition:
[A]n individual shall be considered to be disabled for purposes of this subchapter if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months.
A First Party Special Needs Trust is a type of SNT where the trust is funded with the assets of the disabled person. Typically, these type of SNT are created when the disabled person receives an inheritance, gift, or a settlement from a law suit.
The one draw back to the First Party Special Needs Trust is that it must contain a Medicaid Payback provision. The effect of this provision is that when the disable person passes away, any funds left over in the SNT will be used to cover any funds that Medicaid provided during his or her lifetime. However, the benefit of maintaining Medicaid typically far outweighs the Medicaid Payback provision.
Third Party Special Needs Trust is a type of SNT where the trust is funded with the assets of a third person. Third Party Special Needs Trusts are usually funded either by the Last Will and Testament or the Living Trust after the death of the disabled person parents.
In order to have the assets of the SNT not countable for the purpose of SSI and Medicaid programs, the disabled person must not have the power to revoke the trust, terminate the trust, or direct the trust assets to be distributed for his or her support.
Special Needs Trusts are complicated and need to be drafted properly. The main objective of Special Need Trust Planning is to make sure that the disabled person does not lose their governmental benefits.
To speak to us about special needs planning, please contact us to schedule a free consultation. You may also call (305) 489-1415 to schedule your free consultation or fill the contact form in this page.