The Special Needs Trust
The Special Needs Trust has a trustee, which may be an individual or a not-for-profit organization, depending on the beneficiary’s age. The trustee holds and manages the trust resources and distributes the assets to directly pay for goods and services provided to the disabled beneficiary. The trust can pay for transportation and travel, entertainment, education, attending social and recreational events, all kinds of electronic equipment and appliances, and medical and dental expenses not covered by Medicaid to enhance the disabled individual’s quality of life. A Special Needs Trust preserves the disabled individual’s right to the government benefits, while paying for almost any expense not covered by these benefits. However, it should be noted that transfer of the disabled person’s own assets to certain first-party (payback) Special Needs Trusts may create a penalty period and temporary ineligibility for long-term medical care under Pennsylvania rules.
The Law Offices of Leo Mikityanskiy specializes in the creation of Special Needs Trusts. Creating a trust that does not comply with the legal requirements or does not contain specific Special Needs Trust language may cause the disabled individual to lose government benefits. Therefore, proper legal advice and planning are essential when setting up a Special Needs Trust.
Requirements to Establish a Special Needs Trust:
The Special Needs Trust
- Is created under the federal and state laws that allow disabled individuals this extraordinary benefit, and all necessary approvals must be obtained from the local government organizations responsible for public benefits (Pennsylvania Department of Human Services is responsible for Medical Assistance administration);
- Can be created by the disabled individual (if under 65 years old), a parent, a grandparent, a guardian of the disabled individual, or by a petition to the court;
- Can only be established for the sole benefit of the disabled individual, although a third party Special Needs Trust that is not funded with the disabled individual’s own money or assets can name a residual beneficiary;
- Must give the trustee discretion to spend the trust assets as the trustee deems appropriate and have language that makes it impossible for the disabled individual to demand trust fund distributions;
- Must make it clear that the trust is intended to supplement, not supplant, the government benefits but is not intended to be a basic support trust; and
- Should specify that the trustee is to administer the trust so that the disabled individual’s eligibility for the government benefits is not affected.
Appointment of a Trustee of a Special Needs Trust.
A family member or a friend can often act as the trustee of a Special Needs Trust for a beneficiary under 65 years of age. For beneficiaries over 65, a not-for-profit organization must be the trustee, and such trusts are frequently called Pooled Special Needs Trusts because the resources of many disabled individuals are pooled and managed by the organization. The trustee exercises discretion in reviewing and approving disbursements from the Special Needs Trust for the supplemental needs of the beneficiary.
Funding A Special Needs Trust.
A Special Needs Trust can be funded by gifts from relatives made directly to the trust instead of to the disabled individual, or through a pour-over will, but the trust should be established and funded during the lifetime of the person who intends to leave a gift. Properly funding the trust may become a critical issue in determining whether the remaining trust estate is paid to residual beneficiaries named in the trust. The Special Needs Trust may also be funded with the disabled individual’s own money or assets, including lawsuit awards or personal injury settlements, but that imposes additional limitations on what happens with the unused resources after the disabled beneficiary’s death.
Caring for Disabled Individuals.
Children and adults with special needs often rely on government assistance for covering their expenses and medical expenditures, which are typically very high. Proper planning for children and adults with special needs is essential to ensure their continued access to the government benefits they need on a daily basis, such as Supplemental Security Income (SSI) and Medicaid.
The government benefits usually pay for the ordinary expenses, such as housing, food, and clothing, and the medical expenses, which include doctor visits, medications, rehabilitation and hospital stays. However, these covered needs are very basic, and the modest amount of the government financial assistance does not allow for additional comforts or expenditures. Unfortunately, the federal and state laws regulating government assistance dictate that you cannot give the disabled individuals money, or even non-monetary benefits, without jeopardizing their government assistance such as SSI and Medicaid, or without a possible reduction of SSI benefits. For the same reasons, disabled individuals cannot directly receive gifts, inheritance, or settlements from lawsuits without losing some or all of their benefits. Needless to say, the loss of government benefits, especially Medicaid that covers the medical care, can be devastating for these disabled individuals and those caring for them.
If you are looking for an attorney in Bucks County or Northeast Philadelphia, PA to help you establish a Special Needs Trust for a disabled individual, please contact attorney Leonid Mikityanskiy at our Feasterville, PA office at (215) 357-1400.
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