Estate Planning for Special Needs

By Ellie Schlagel

When planning for the financial needs of a disabled or elderly loved one, it is essential to understand how beneficial a legal tool, like a trust, can be. Not only can a trust ensure a loved one is cared for, but a carefully managed trust can also help them continue to access important benefits such as Medicaid or Supplemental Security Income.

There are several different types of trusts to consider. First, a Special Needs Trust is designed to allow individuals with disabilities to remain qualified for government benefits. The assets of this trust may only be used for disability-related needs and not basic living expenses. For example, the trust funds may be used to purchase medical equipment or transportation but cannot be used to pay rent or purchase food.

A Pooled Trust is a type of Special Needs Trust that allows multiple beneficiaries to pool their assets into one account. Each beneficiary has their own sub-account that is funded to benefit themselves. Upon the death of a beneficiary, the outstanding funds can be used for the remaining beneficiaries. The Pooled Trust is an important tool for people with disabilities who may not have enough assets to fund a traditional Special Needs Trust on their own.

A Discretionary Support Trust provides support for someone with a disability but differs from the previous two trusts in that the trustee maintains discretion in allocating the funds toward care, support, maintenance, and education. However, this type of trust is subject to creditor claims and estate recovery.

A Supplemental Needs Trust is designed to work with government benefits and to cover areas where government benefits are lacking. Funds from this trust may be used for living expenses, but only as long as the funds are not used to replace government benefits. The management of this trust is tricky. Mismanagement could result in the assets being considered available for Medicaid eligibility and a loss of benefits.

Each of these trusts must be created and managed carefully to ensure government benefits are not impacted. If you are interested in creating any of the above-described trusts, please consult with a licensed attorney.