Protect vulnerable loved ones with Special Needs Trusts

If you want to leave money or property to a loved one with a disability, you must plan carefully. Otherwise, you could jeopardize your loved one’s ability to receive Supplemental Security Income (SSI) and Medicaid benefits.

By setting up a “special needs trust” in your will, you can avoid some of these problems.

Owning a house, a car, furnishings, and normal personal effects does not affect eligibility for SSI or Medicaid. But other assets, including cash in the bank, will disqualify your loved one from benefits. For example, if you leave your loved one $10,000 in cash, that gift would disqualify your loved one from receiving SSI or Medicaid.

How a Special Needs Trust Can Help

A way around losing eligibility for SSI or Medicaid is to create what’s called a special needs or supplemental needs trust. Then, instead of leaving property directly to your loved one, you leave it to the special needs trust.

You also choose someone to serve as trustee, who will have complete discretion over the trust property and will be in charge of spending money on your loved one’s behalf. Since your loved one will have no control over the money, SSI and Medicaid administrators will ignore the trust property for program eligibility purposes. The trust ends when it is no longer needed — commonly, at the beneficiary’s death or when the trust funds have all been spent.

How Trust Funds Can Be Spent

The trustee cannot give money directly to your loved one — that could interfere with eligibility for SSI and Medicaid. But the trustee can spend trust assets to buy a wide variety of goods and services for your loved one. Special needs trust funds are commonly used to pay for personal care attendants, vacations, home furnishings, out-of-pocket medical and dental expenses, education, recreation, vehicles, and physical rehabilitation.