Benefits of Having a Special Needs Trust
There are many situations where a person may wish to help provide for the needs of loved ones who have special needs. Because people with physical disabilities, mental impairments, or other conditions may be unable to work and earn an income, they may struggle to provide for themselves. To ensure that this person’s ongoing needs will be met, family members may wish to step in and provide financial assistance.
However, they may not realize that giving money to a person, buying items for them to use, or otherwise providing them with financial support could disqualify them from receiving government aid. To preserve a person’s right to receive public benefits, family members should create a special needs trust. Setting up this type of trust can be an important part of the estate planning process.
Why Should I Use a Special Needs Trust?
People who suffer from disabilities that affect their ability to maintain gainful employment may qualify for many types of benefits. To receive these types of benefits, they will usually need to show that they have limited financial resources. For example, to qualify for Supplemental Security Income (SSI) through Social Security, a person’s financial resources must be under $2,000. Because of this, a family member who gifts a significant amount of money or property to a person with special needs may cause the person to be ineligible for SSI or other benefits.
To prevent jeopardizing a person’s public benefits, a family member can create a special needs trust and name the disabled person as the beneficiary. In these cases, the assets a person who wishes to use to help their loved one will be owned by the trust rather than the person with a disability. Distributions from the trust may be provided to the beneficiary to help them meet their ongoing needs while ensuring that they will be able to receive ongoing government benefits.
The funds in a special needs trust may need to be used for specific allowed purposes, and these may include:
- Educational expenses, including things like tuition or tutoring.
- Providing medical care that is not covered by programs such as Medicare or Medicaid. This can include certain types of special or alternative therapies, as well as assistive devices or technology.
- Household belongings like a computer, cell phone, furniture, or clothing.
- Services provided to them, such as cleaners for their home, internet service, or cell phone service.
- Entertainment, including things like travel or other activities.
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