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The Use of Supplemental/Special Needs Trusts in Estate Planning

January 7th, 2014

Posted in Asset Protection,Estate & Personal Planning

Many disabled Americans receive governmental benefits such as Supplemental Security Income and Medicaid to assist in their time of need.  These individuals rely on this assistance for supplemental income and medical care expenses (including nursing home care).  While governmental benefits assist disabled individuals with covering their expenses, the benefits often cannot cover all expenses.  In these cases, family or friends sometimes provide financial support and help cover any remaining expenses.  These same family and friends also wish to assist after they pass away so they include the disabled individual in a will or name the disabled individual as a beneficiary of a trust.  In this respect, family and friends should be aware of the implications that leaving assets or money in the form of a gift or bequest to a disabled person as it relates to current or future needs for governmental benefits.  In other words, family and friends should be aware that their generosity in the form of a gift or bequest may also affect the eligibility of a disabled person for governmental benefits.

Leaving assets outright, or even in some forms of trusts, may disqualify a disabled or medically needy individual from receiving Supplemental Security Income (SSI) or Florida Medicaid.  Careful planning is necessary to protect the interests of a disabled or medically needy beneficiary.  This is because there are asset and income tests the disabled or medically needy beneficiary must pass in order to remain eligible for governmental benefits.  If a disabled individual is named the beneficiary of income or property, their standing under the asset and income tests may be affected and so too their eligibility for governmental benefits.  To protect the disabled beneficiary from being stripped of eligibility, a settlor may setup a supplemental or special needs trust.  In a supplemental/special needs trust, the trust principal or income does not hinder a disabled individual’s eligibility to receive governmental benefits.  For example, the trust may permit a trustee to make discretionary distributions to a disabled beneficiary where governmental benefits prove inadequate.  Therefore, a supplemental/special needs trust is a vital tool settlors use to care for disabled beneficiaries by supplementing the governmental benefits a disabled beneficiary is entitled to rather than supplanting those resources.  It is advisable to engage a qualified Florida attorney to assist in Florida Medicaid or SSI planning.

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