You may generally think of a trust as only for your minor children, but a special needs trust can be created for any disabled individual regardless of age.
Protect Your Child’s Eligibility
If your child has qualified for governmental benefits such as Social Security Disability (SSI), Medicare or food stamps, you can protect his or her eligibility for these benefits by creating a special needs trust.
Should your minor or adult child be receiving Medicaid, which is a joint state and federal program, he or she must have assets that fall below a certain level, usually $2000. Your state will consider any income being received by your child and the value of any assets in his or her name in considering eligibility.
By establishing a special needs trust, your child can receive additional funds but because he or she is restricted from access to the trust funds, the law considers these as not legally available and will not count them towards your child’s assets. Your trustee must also have sole discretion over the distribution of the funds and must only purchase goods and services on your child’s behalf instead of giving money to your child directly.
Inheritances and Personal Injury Awards
In cases of personal injury awards or inheritances, you can create a self-settled trust with funds owned by your disabled child such as from injury awards or inheritances. The child must be under 65 in this case and Medicaid must be paid back from the trust assets for any long-term care provided.
Nursing home care can also be benefitted in a qualified pool trust, a form of the self-settled trust. This trust is managed by a nonprofit organization although the funds remaining when your child passes away will reimburse Medicaid, though in some cases your attorney may be able to structure it so that some or all of the remaining funds can pass to surviving family members.
Funding the Trust
You can fund the trust while you are still alive or transfer funds to the trust upon your passing if the trust is the designated beneficiary. This is true for other benefits such as life insurance policies.
Other sources can be cash gifts, investment income, retirement plan benefits, personal property, real property and personal injury settlements. You should consider speaking to a trusts and estates attorney regarding the advantages and disadvantages of funding the trust through certain sources to avoid future problems.