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Special Needs Planning

If you are the parent or family member of a disabled person, it is important that you learn more about special needs planning and why it is so important for the disabled person. As you grow older, you may be concerned with who is going to help meet the needs of your disabled child when you are no longer able to help in your child’s care.  And, after your death, you have options to protect the disabled child’s inheritance to make sure the child’s essential needs are always met.  Planning now for the care of your disabled child can help to protect your child for the remainder of his or her life, can allow him or her to receive ongoing benefits, such as Medicaid or SSI, and, at the same time, ensure they can meet other needs that governments will not pay.  This could include specific a medical treatment or therapy, or something to make your child’s life better when their resources would otherwise not allow them to make these purchases.

A special needs trust is a trust that allows the beneficiary to continue receiving their benefits, such as Medicaid, but will supplement their benefits.  The resources held in an well-drafted special needs trust will not count against the beneficiary for purposes of qualifying for the benefits.

In addition to protecting inheritance for your child, a standalone trust may help any other person who wants to leave a gift or bequest to your child. That person can also direct their funds into the special needs trust you have established.

Finally, under the federal law, even a disabled person who meets certain criteria can put their own money in trust.   There are two common very common scenarios in which this can happen:

  1. When the disabled person receives an inheritance or gift outright of significant value, and the person who gifted the money did not gift it into a special needs trust; and
  2. When the disabled person is the recipient of settlement proceeds or award from a personal injury, medical malpractice, or other lawsuit.  (See Protecting Settlements/MSAs.)

If the disabled person’s disability is established before creating the trust and the disabled person is under the age of 65, this trust can be invaluable in protecting the disabled person for the rest of their lives.  In addition, in the case where Medicaid has paid for services related to an accident or injury, the State may defer any recovery on those payments until the death of the beneficiary.  Depending on the amount that Medicaid has paid on the disabled person’s behalf, this adds a strong incentive to placing settlement proceeds into a trust.  One downside to this type of trust is a requirement that it must have a “payback” provision.  A payback provision means that on the death of the disabled person, the trustee must pay the State back for any Medicaid payments made for the benefit of the disabled person during their life.  Despite this requirement, the benefits of placing a disabled person’s assets in this type of trust far outweigh the drawbacks.