If you want to give or leave money or property to your child or a loved one with special needs, you must plan carefully or you could jeopardize his or her ability to receive certain benefits including Supplemental Security Income (SSI), Social Security Disability (SSDI), Medicaid benefits, vocational rehabilitation or subsidized housing. These benefit programs place limits on assets and income, subject to a few exceptions, so receiving assets, such as a lump sum of money or property, can be problematic for such person. A gift or inheritance can cause the person’s assets or income to exceed the limits, disqualifying the person from receiving much needed government assistance. Setting up a Special Needs Trust (SNT) can help to avoid this problem. A Special Needs Trust (SNT) is essentially a mechanism to hold property, which can include real estate, financial assets, or other tangible items, managed by a trustee to benefit someone with physical or mental disabilities. An SNT can be established whether or not the person with special needs has the capacity to manage his or her own finances.
There are two types of SNTs, a third-party SNT and a first-party SNT. A third-party SNT is usually established and funded by the parents or relatives of an individual with special needs. A properly drafted third-party SNT allows the person with special needs to receive inheritances, gifts, or other funds but not lose eligibility for certain government programs. These SNTs allows funds to legally be used to improve the beneficiary’s quality of life by providing for items that are not considered necessities of life such as vacations, home furnishings, music and educational classes, and more. A first-party SNT is most often used when the person with a disability inherits money or property outright or receives a court settlement. These SNTs also are useful when a person without a prior disability owns assets in his or her name, later becomes disabled, and thereafter needs to qualify for public benefits that have an income or asset limitation.
AKC Law’s Estate Planning Team has significant experience in helping families understand, prepare and administer Special Needs Trusts.