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What is a Special Needs Trust and Do I Need One?

What is a Special Needs Trust and Do I Need One?

Special Needs Trusts (also referred to as a Supplemental Needs Trust, they are one and the same) are trusts authorized by Federal Law designed to help families and loved ones dealing with Medicaid related issues. The primary purpose of the Special Needs Trust is to create a supplemental support system to an individual on Medicaid without disqualifying that person from receiving Medicaid.


When applying for Medicaid , the government agencies examine the applicant's resources to determine if the applicant is eligible for Medicaid. The resources reviewed include income, savings, investments, recent transfers of assets, as well as other possible resources. However, not all resources are counted for the purposes of the Medicaid application. (North Carolina residents will apply for Medicaid with the North Carolina Department of Health and Human Services: https://dma.ncdhhs.gov/)



There is a category of assets that Medicaid considers "non-countable" when reviewing any person's Medicaid application. The resources contained within a Special Needs Trust are considered "non-countable," so long as some strict rules are followed during the lifetime of the Special Needs Trust.



The Special Needs Trust generally has three key components: 1) A Medicaid Beneficiary, 2) a Trustee for the Trust to guard the funds and disburse any money to the Medicaid Beneficiary, and 3) the Trust itself as the owner of the funds until they are released.



When looking at a Special Needs Trust, it is critically important to make sure that the Trust document only supplements the care of the Medicaid recipient. If detailed rules are not followed, you may accidentally disqualify the individual from Medicaid.



One of the most important things to consider when looking at a Special Needs Trust is to understand that the funds in the Trust are not available to the person receiving Medicaid. As funny as this may sound at first, the funds in the trusts are for the benefit of that individual, but he or she may not directly access those funds. The restrictions on the funds in the Special Needs Trust are that the beneficiary cannot receive the money directly, and money can only be released or spent at the discretion of the Trustee.



So what can the Trustee spend money on then?



The Trustee can use the Trust Funds to purchase items of supplemental care that enhance the Medicaid recipient's quality of life. Some examples include cable television, books, electronic equipment, advanced and extra medical care not covered by Medicaid, some physical therapeutic treatments, as well as other kinds of care. The Trustee has to purchase these items directly with the Trust funds, the Medicaid recipient cannot be the conduit of the funds.



You do not have to be a Medicaid recipient to set up a Special Needs Trust. Grandparents and parents can establish a Special Needs Trust as well to help care for any children or grandchildren they may have.



A Special Needs Trust is not for everyone, but it does make a lot of sense for the right people. If you believe that you may be in need of Medicaid in the future, as attorneys we will be more than glad to speak with you and see if a Special Needs Trust is the right fit for your situation. We will be glad to provide assistance to you in making this complex decision.


Posted by wiley

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