What is a Special Needs Trust?
A special needs trust (also known as a supplemental needs trust) is a specific type of trust holding title to property for the benefit of a disabled child or disabled adult. The purpose of the trust is to supplement benefits received from various government programs, such as Supplemental Security Income (SSI) or Medicaid, and not disqualify the disabled adult from continuing to receive these government benefits. The trust provides the disabled child or adult an opportunity for a higher quality of life with these supplemental benefits. These trusts are not designed to provide basic support, but instead the trust pays for comforts and luxuries that could not be paid for by public assistance funds, such as education, recreation, counseling and entertainment. The special needs trust can hold cash, investments, personal property, real estate, insurance proceeds or additional assets, and it can be listed as a beneficiary to receive assets such as insurance from a 3rd party.
Special needs trusts (also known as “supplemental needs” trusts) allow a disabled beneficiary to receive gifts, lawsuit settlements, or other funds and yet not lose his or her eligibility for certain government programs. Such trusts are drafted so that the funds will not be considered to belong to the beneficiary in determining eligibility for public benefits. As their name implies, special needs trusts are designed not to provide basic support, but instead to pay for comforts and luxuries that could not be paid for by public assistance funds. These trusts typically pay for things like education, recreation, counseling, and medical attention beyond the simple necessities of life. (However, the trustee can use trust funds for food, clothing, and shelter if the trustee decides doing so is in the beneficiary’s best interest despite a possible loss or reduction in public assistance.) Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable
A special needs trust is a trust created for the purpose of preserving governmental benefits for disabled or aged beneficiaries. A well designed and administered special needs trust can provide funds to supplement a disabled or aged beneficiary’s governmental benefits without interfering with governmental aid. A special needs trust may be created during the lifetime of parents of a disabled person in their living trust that later becomes irrevocable at death of the parent. The special needs trust created by a parent or other third party is often referred to as a third party special needs trust. A litigation special needs trust is created by the court with the proceeds of a settlement or judgment and is usually irrevocable.
