Dollars & Sense - Special Need Trust

If one of your children is mentally or physically handicapped you may want to consult with an attorney about setting up a Special Needs Trust for that child. People with disabilities are frequently eligible for various forms of government assistance. One of these programs is Medicaid and Supplemental Security Income or SSI. The benefits paid under this program cease whenever the recipient has more than $2000 in their own name. If a parent should die and their disabled child was to inherit his or her parent’s estate, all of those assets would need to be consumed down to the $2000 level before the government programs would again provide for that child. Personally, that is the way I ethically feel the law should work. There are others however who feel since they’ve paid taxes all their lives, programs like SSI should provide for their disabled child. That’s when those folks ask an attorney to establish a Special Needs Trust. This trust can hold the parent’s estate and dole out cash to provide “extras” for the child without forfeiting the government benefits. The trust wording must avoid terms like for “health, welfare and support” lest the trust become null and void in the eyes of SSI. Income from a Special Needs Trust should not be paid directly to the child. Someone else should be the trustee and control the disposition of its income. A disabled person can also establish his or her own Special Needs Trust. There is a requirement that a “payback” clause be included in the wording however.

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