What is a Special Needs Trust and How Does it Work? 

If you have a loved one with special needs, you know how important government benefits are to their well-being. You also know there is a fine line you must walk if you want to provide additional financial support to your loved one without jeopardizing those benefits. 

At Palmer & Slay PLLC, we help people in the Brandon, Mississippi area craft estate plans that take this balancing act into consideration — ensuring the wealth you pass on does not inadvertently harm those you love the most. 

This typically means setting up a special needs trust that can hold assets on behalf of your loved one without making them ineligible for government benefits like Supplemental Security Income (SSI), Medicaid, Section 8 Housing, or food stamps. 

Special Needs Trusts Benefit Those Who Need Extra Support 

A person who relies on government benefits typically loses their eligibility if they suddenly inherit even a modest amount of money or other assets. They are often forced to spend all of the assets they have inherited before once again becoming eligible for government-provided benefits. In the meantime, they must enroll in different insurance, get different doctors, and find different caretakers or career programs, all while grieving a loved one. 

Policymakers realized this was a disaster, so they modified most public benefit laws to allow people with special needs to inherit assets through a special needs trust. 

A special needs trust is a pot of money or other assets managed on behalf of someone with mental or physical disabilities. The person who creates the trust is called the grantor. The grantor selects one or more trustees who manage the assets in the trust for the benefit of the individual with special needs. The individual with special needs is the trust beneficiary. 

When drafted and administered properly, these trusts preserve eligibility for government programs while providing the person with special needs the means to get the sort of extra care and support they deserve. 

How Do Special Needs Trusts Work? 

Properly crafted special needs trusts do not impact the beneficiary’s eligibility for benefits because he or she is never considered the legal owner of the assets held in trust — even though the assets held in trust must be used for his or her benefit. 

Typically, the trustees make decisions about how to spend the assets in trust, and payments go directly to the third parties who provide a good or service that improves the beneficiary’s quality of life. 

Permissible trust distributions include:

  • School tuition, books, and supplies  
  • Health & life insurance  
  • Entertainment (books, movies, audio, video)  
  • Bus passes  
  • Purchase & maintenance of a vehicle 
  • Payment to third parties for home repairs and improvements  
  • Household goods  
  • Cleaning supplies  
  • Medical costs not covered by the government
  • Massages  
  • Home care services not covered by other programs  
  • Medical equipment 

And this is just the tip of the iceberg. It is possible to get very creative with the use of trust funds depending on what will most benefit your loved one. 

However, there are strict laws that need to be followed to ensure trust funds are not abused. One slip-up could make your loved one ineligible for government benefits or force the trust to reimburse the government for certain benefits it provided. It is therefore important to work with experienced estate planning attorneys, like those at Palmer & Slay, who know how to take full advantage of the laws governing the use of special needs trusts. 

Preserving Your Wealth. Protecting Your Loved Ones. 

Nobody likes to think about what will happen to their loved ones after they are gone, but it is especially painful to think about such things if you have a loved one who needs special care and support. 

The Palmer & Slay team is here to help you figure out what steps to take to ensure your estate plan protects your loved ones with mental and physical disabilities without jeopardizing their government benefits. Please contact us today if you want additional information about special needs trusts or other estate planning tools that can meet your family’s unique needs.