With the rising costs of health and long-term care, it is essential that disabled individuals maintain eligibility for government assistance programs. A first party Special Needs Trust (SNT) is an important and useful way for a disabled person to hold assets without compromising eligibility for and access to public benefits, such as Supplemental Security Income (SSI) and Medicaid.
SNTs can either be first party (also called “self settled”, where the trust is funded using the disabled person’s assets) or third party (where the trust is funded by someone other than the disabled person). The rules have recently been changed to allow the disabled person himself (if otherwise competent) to establish a self settled trust. Formerly this had to be done by a parent, grandparent, guardian or the court. Under a self-settled trust, the government is entitled to reimbursement for Medicaid payments made during the beneficiary’s lifetime. A parent using their funds would always choose to set up a third party SNT. It avoids the need for “payback” because the beneficiary never owned any of the assets funding the trust.
Regardless of who funds the SNT, however, it must be appropriately drafted to avoid jeopardizing the disabled person’s access to continuing government benefits. The choice of Trustee is also critical, since improperly distributed funds could also adversely affect the beneficiary’s continued eligibility. Family trustees must seek knowledgeable counsel to administer the trust properly.
Another option available to individuals with disabilities and their families is an ABLE account. Named for the Achieving a Better Life Experience Act, ABLE accounts are tax-advantaged savings accounts that help cover certain expenses of a disabled child while maintaining their eligibility for federal public benefits. Appropriate expenditures include daily living expenses, education, housing, transportation, health care expenses, personal support, employment training, and other expenses that support the beneficiary’s quality of life.
There are specific requirements to be eligible for an ABLE account. Up to $14,000 a year can be put in the account by the disabled person or anyone else, and up to $100,000 total can be put in the account before eligibility for government benefits is affected. The disabled beneficiary is the owner of the account, although legal guardianship or powers of attorney allow others to access and manage the funds.
SNTs and ABLE accounts are incredibly useful tools for disabled individuals and their families to hold on to assets while still qualifying for necessary government benefits. Our firm is well-versed in drafting SNTs and assisting clients in setting up an ABLE account.