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Special Needs Trusts Protect Assistance Eligibility

 Posted on February 09, 2017 in Estate Planning

Lombard estate planning lawyersFor the more vulnerable members of society, especially the disabled and the elderly, life can become a complex dance of government forms and applications. Social Security (SSI/SSDI) is a prime example of this, with lengthy proofs required as to why disability is necessary and how to show you are not ‘gaming the system.’ However, the strictures of being on disability mean that a person is not entitled to possess assets above a certain amount, which can be prohibitive. Special or supplemental needs trusts (SNTs) have been used for years to help address this disparity.

What Is the Purpose of an SNT?

The primary purpose of an SNT is to help a disabled or elderly person afford better care than that to which they would otherwise be entitled. While Social Security disability (SSDI) has no asset limit, many people do not qualify for it, and instead apply to receive SSI (the program for low-income workers). However, when one is ruled eligible to receive SSI, one is entitled to retain only a certain amount of assets - for most people, no more than $2,000 in value. This is tenable for some, but for many others it amounts to enforced poverty. For those who are physically disabled, having such minimal assets and no ability to work (because a bank account and a paycheck are resources) can result in privation.

SNTs allow a disabled person to place assets in trust, or to have a family member place assets in trust for them, so as to preserve a potentially higher quality of life than they would have with only the SSI-mandated $2,000 in assets. For those on SSDI, an SNT can also act as a safeguard against the unscrupulous, or against family members who might attempt to appropriate assets that rightfully belong to the disabled person.

Creating a Strong SNT

There are two types of SNTs, first-party and third-party. As one might imagine, the first-party SNT is comprised of assets in the disabled person’s name that might otherwise place their net worth over the necessary SSI. These are also referred to as “self-settled trusts,” and in some situations, may even be created by the disabled person if doing so would not render them ineligible for Social Security programs in the first place. The other type, third-party trusts, are created by the immediate family members of the disabled person for estate planning purposes - that is, to gift or allow the use of assets not in the disabled person’s name.

There are several criteria that these must meet in order to accurately represent the disabled person’s needs, but the most important are:

  • When the trust is created, the beneficiary may not be over age 65 - if they are, a different type of trust may be necessary;
  • The SNT must be irrevocable;
  • There must be a Medicaid payback provision - that is, there must be a provision to reimburse Medicaid for amounts expended once the disabled person is deceased;  and
  • The person must be disabled under the terms of the Social Security Act. If the person is not on disability, this can be difficult to prove but it is not impossible.

Contact a Knowledgeable Attorney

Special needs trusts are complex instruments that many attorneys have no experience with whatsoever. You need a lawyer who has handled SNTs before and knows how to craft them so that you or your loved one is well protected. Our experienced Lombard estate planning attorneys are happy to help answer any questions you have and guide you through the process of ensuring your loved one is protected. Call us today to set up an appointment.



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