How could a special needs trust help my disabled loved one?

When a loved one has a disability that keeps them from working, they may need to rely on Supplemental Security Income (SSI), Medicaid, housing assistance or other programs in order to survive. Unfortunately, the eligibility requirements for these programs are strict, meaning that the person with the disability cannot have more than a small sum of money in order to qualify for the program.

Well-meaning relatives sometimes give money to people who rely on government assistance, and that can have disastrous results. You mean to give a few thousand dollars to make your loved one’s life easier – but the gift or bequest gets them kicked off of their government programs instead.

It’s not as if your few thousand dollars can replace the need for those programs. It’s just that the asset limits are so low.

There is a way to avoid the problem. Instead of giving the money directly or leaving it in a will, you can set up a special needs trust instead. This is also a good way to manage income from a lawsuit verdict or settlement. You want the money to improve the life of your loved one – not to replace existing services.

Special needs trusts avoid the eligibility problem

Social Security Disability, Medicaid and many other government programs consider a person’s income and assets when determining eligibility. Their rules allow the person to receive benefits from a special needs trust without changing their eligibility.

This is because the money is not directly under the control of the beneficiary (the person with the disability.) Instead, it is under the control of a trustee who is acting under specific instructions. The trustee can only provide money for “supplemental and extra care,” not for living expenses, health insurance or other basic support.

The trustee can be a friend or family member, or you can hire a professional trustee. The trustee can provide payment for a wide range of supplemental care, whether that means vocational training, medical devices, home accessibility, a vehicle or even recreation.

Naturally, Social Security, Medicaid and other government assistance programs have rules in place to prevent abuse. You should consult with an estate planning attorney to determine the rules of specific programs and have those incorporated into the trust.

Don’t threaten your loved one’s eligibility for the government assistance they rely on to survive. Avoid giving money directly or through a will, as these would be considered in the eligibility equation. Money you give to a special needs trust is legally separate from the person’s other assets. That makes a special needs trust an excellent way to improve the situation of a loved one without taking away the programs they need most.