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How does a special needs trust protect benefit eligibility?

On Behalf of | Aug 29, 2023 | Special Needs Planning |

A loved one with special needs may require the help of government benefits such as Supplemental Security Income and Medicaid. However, your relative could lose out on these benefits without a special needs trust.

When someone with special needs receives an inheritance or a monetary gift, it can cause the individual to become ineligible to receive further benefits. Placing inheritances and gifts into a special needs trust may avoid this. A special needs trust has special language that makes it an effective and useful tool.

Giving trust control to another person

A special needs trust is one that the beneficiary does not control. Your special needs relative cannot be the trustee of the trust or exercise any direction over the trust, such as altering the terms of the trust or abolishing it altogether.

The idea of a special needs trust is that the beneficiary does not own the assets in the trust. This helps ensure that the government does not count it in a means test which could disqualify your loved one from benefits.

Limitations on trust payments

It also matters how your special needs relative spends the trust money. If government benefits pay for shelter, food and medical benefits, the trust should not go toward those expenses.

When you establish a trust, you can use the trust documents to direct your trustee to make payments for specific expenses. These can include dental costs, rehabilitation services or any medical treatment not covered by existing benefits.

Crafting the trust with the right language helps ensure your disabled loved one can utilize all sources of financial help to their fullest and avoid a possibly disastrous loss of benefits in the future.


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