A supplemental needs trust (sometimes called a special needs trust) is an estate planning document created to benefit an individual who has a disability (“an individual under a mental or physical disability, or a person with a chronic or acquired illness”) without disqualifying him or her from benefits received from government programs such as Medicaid and Social Security; also it can be used for supplemental and extra care over and above what the local government provides. Those benefits may include Medicaid, Supplemental Security Income (SSI), subsidized housing, vocational rehabilitation, and other benefits.
Pooled Trusts
A pooled trust or Cooperative Master Trust is a special form of Supplemental Needs Trust which can be established by not-for-profit organizations or groups on behalf of their membership. While they may benefit the disabled, they have some drawbacks. In particular, you have to make sure that the pooled trust is properly supervised and managed. Also, you have to relinquish control of your assets to the trust. Make sure that the pooled trust has an established track record of successful management.
Special Needs Trusts created by family
The parents provide the money for the trust often by writing a will or by purchasing life insurance payable to the trust, also; some parents place their property in an “inter vivos” or ” living” trust and provide in the trust that the disabled daughter or son is the beneficiary. An inter vivos trust becomes effective immediately.
Court Ordered Special Needs Trust
It is used only for special circumstances such as where the person with a disability has inherited money or received a court settlement, to ensure that the disabled person is still eligible for benefits.
You can create a supplemental needs trust at any time before the beneficiary’s 65th birthday. To ensure long term care for a disabled individual, it is best to create a Supplemental Needs Trust early in a child’s life.
Also the disabled or chronically ill person may at some time during her or his lifetime come into funds from other sources, such as a personal injury settlement, insurance proceeds, Social Security back payments… etc. You will want to ensure that these assets do not make the disabled individual ineligible to receive benefits.
Any attorney that concentrates in special needs issues can create a Supplemental Needs Trust but it can be easily invalidated if the proper language is not utilized throughout. So, make sure that the Attorney you choose is especially familiar with Special Needs Trusts, the appropriate drafting language and the various benefits systems.
Ryan C. Young | Estate Planning Attorney | Richmond, Virginia
