Why Is A Special Needs Trust Critical To Handle The Needs Of A Disabled Child?

It is absolutely critical to have a trust for the benefit of a special needs child in order to prevent the loss of public benefits. If someone receives an inheritance and they have Medicaid or other means tested benefits, then they will lose those public benefits and have to utilize an inheritance for their insurance and daily living expenses, until their inheritance is back down to zero. Then, they have to reapply for all public benefits. In many cases, public benefits take a great deal of time and effort to get approved.

There are different types of special needs trusts that you can create which will preserve government benefits. If you’ve received an inheritance today, you create a trust tomorrow, you die two years from now, and there’s money left in the trust, you’ve created a first-party special needs trust. That means you have to have in that trust a state payback provision, which basically states that if there is any money in your special needs trust at the time of your death, then the money left has to be used to pay back the state and federal government agencies that have expended money on you.

If there is prior payment planning and you were left money in a special needs trust, then there is no payback provision upon your death. The money will be preserved through the generations. If you are looking at receiving an inheritance and you have public benefits already, then you can create a different type of special needs trust to preserve your public benefits. It’s just not as advanced as had your loved one created a special needs trust in their legal documents. Now, you have to use your legal documents and it has to include a payback provision when you pass away.

What Special Needs Provisions Should Be Included In The Trust?

What makes a special needs trust different are the provisions. The primary factor that makes this trust different than most is that the language of the trust will require the trustee to make benefits directly to providers for goods and services solely for the benefit of the beneficiary. The trustee cannot put cash from the trust account into the disabled beneficiaries account and just pays the beneficiaries bills directly to the provider. The next thing about special needs trust is that in many circumstances, the trust will be irrevocable. It can be modified under certain circumstances but there are very limited circumstances where this trust can be revoked. Another feature of the special needs trust that makes it unique is that a special needs beneficiary of the trust cannot also be the trustee. The trustee and the beneficiary, as a general rule, will be different under a special needs trust.

Additionally, special needs trusts may provide more language about distributions than a normal general discretionary trust. A general discretionary trust will say that the trustee can make distributions to the beneficiaries and for the beneficiaries’ health, education, maintenance, and support. A special needs trust will say something to the effect that the trustee will make distributions for the sole benefit of the disabled beneficiary, including but not limited to a massive list of things that the trustee can purchase for the benefit of the special needs beneficiary.

For more information on Special Needs Trusts For Disabled Children, an initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (904) 398-6100 today.

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