Special Needs Planning

If you currently provide care for a loved one with special needs (such as mental or physical disabilities), you must have contemplated with concern about what may happen to them when you are no longer able to provide and care for them.

While you can certainly provide that they receive money and assetsf, such a bequest may prevent them from qualifying for essential benefits under the Supplemental Security Income (SSI) and Medicaid programs. However, public monetary benefits provide only for the bare necessities such as food, housing and, in some cases, clothing. As you can imagine, these limited benefits will not provide those loved ones with the resources that would allow them to enjoy a richer quality of life. But if, for example, parents leave any assets to their child who is receiving means-based public benefits, they run the risk of disqualifying the child from receiving them. Fortunately, Congress established rules allowing assets to be held in trust, called a “Special Needs” or “Supplemental Needs” Trust (SNT) for a recipient of SSI and/or Medicaid, as long as certain requirements are met.

Special Needs Trusts

Perkins Thompson can help you establish a Special Needs Trust so that means-based government benefit eligibility is preserved while at the same time providing assets that will meet the supplemental needs of the person with a disability (those that go beyond food, shelter, and the medical and long-term supports and services of Medicaid). The SNT can pay for those additional needs. In fact, the SNT must be designed specifically to supplement, not replace public benefits. Parents should be aware that funds from the trust cannot be distributed directly to the disabled beneficiary. Instead, it must be disbursed to third parties who provide goods and services for use and enjoyment by the disabled beneficiary.

The Special Needs Trust can be used for a variety of life-enhancing expenditures without compromising your loved ones’ eligibility such as:

• Clothing
• Specialized medical equipment not covered by Medicaid or insurance
• Annual check-ups at an independent medical facility
• Personal care attendant or escort
• Special dietary needs
• Attendance of religious services
• Supplemental education and tutoring
• Out-of-pocket medical and dental expenses
• Transportation (including purchase of a vehicle)
• Specialized automobile or van adaptations
• Maintenance of vehicles
• Purchase materials for a hobby or recreation activity
• Funds for trips or vacations
• Funds for entertainment such as movies, shows or ballgames.
• Purchase of goods and services that add pleasure and quality to life, such as furniture and home furnishings, videos and electronics.
• Athletic training or competitions
• Physical and occupational therapy not covered by insurance or governmental benefits

SNTs are a critical component of your estate planning if you have disabled beneficiaries for whom you wish to provide after your passing. An SNT can be a stand-alone trust funded, a sub-trust within your revocable living trust, or a testamentary SNT within your Will. However, in the case of a trust for the benefit of a spouse, federal Medicaid law and the MaineCare Eligibility Manual require the SNT to be established by Will. If the trust is not established by Will, it is a countable asset of the beneficiary spouse, which will disqualify the spouse from receiving SSI and/or Medicaid. Because of this, whenever we plan for governmental means-based benefits for a spouse, we use a testamentary SNT within the Will.

For an overview of what is involved in SNT administration, see “Administering a Special Needs Trust: A Handbook for Trustees (2020 Edition)”, published by the Special Needs Alliance. https://www.specialneedsalliance.org/special-needs-101/free-trustee-handbook/