What is a Special Needs Trust?
A Special Needs Trust is a trust, authorized under federal law, that holds the funds of a disabled beneficiary and allows the beneficiary to qualify for means tested public benefits like Medicaid and Supplemental Security Income (SSI). Were those same assets owned directly by the disabled person, th
Why Fund a Supplemental Needs Trust?If you are funding a Special Needs Trust, there is little choice in how much you can put in. To obtain Medicaid Waiver services for home and community based services, an individual (different if you are married or have children under age 21) can only have $8,000.00 (less if on SSI). You must spend down your assets to that amount or less or you will not receive the services. Putting the excess funds into a Special Needs Trust allows immediate eligibility and the future use of the funds for special and supplemental needs. Funding a Supplemental Needs Trust is helpful because the parent can allocate funds necessary to serve the beneficiary's most important needs.
What Expenses may a Child with Special Needs Encounter?Exactly how many expenses a child with special needs has will depend on the needs and lifestyle of the family and the child's capabilities. If the plan is for the child to live in a private group home, there are a couple of options. Some involve the purchase of a home, which could range from $150,000 to $600,000. In addition, there is a monthly maintenance fee of roughly $500-2,000 a month that covers food and utilities. And then there is staffing which, again, depends on the needs of the disabled person. In addition, many families want to build into the budget eating out once a week or so, electronics (a new iPad every few years for example), a gym membership, etc. If the child lives in a group living situation the costs could be much lower but other ancillary costs for comfort and special therapies that are not covered by public sources need to be considered regardless.
Why have a Special Needs Trust?
When parents pass away, this budget is naturally going to be bigger because we now need to consider replacing the things the parents did. For example, "care coordination" and advocacy are huge undertakings that parents perform. Of course, no one will be able to replace the parents fully, but the trust can often replace some of the more vital services if properly funded. Special Needs Trusts are frequently funded while the parents are alive. Supplemental Needs Trusts are typically funded after the parents' passing. These trusts are their own legal entities they will need, which means that the trust now needs to file a tax return each year and pay taxes (at higher trust levels). There are also legal and trust administration expenses to consider. Even if a family member is the sole trustee, it may be wise for the trustee to consult an attorney each year to make sure nothing is done that could jeopardize benefits.