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What Can Special Needs Trusts Pay For?

Special Needs

Special needs trusts are an irrevocable trust existing under the common law, which allows disabled beneficiaries, to keep enjoying the property held in the trust for his or her own benefit. Additionally, it allows beneficiaries to receive the government benefits that are essentially needs-based. An irrevocable trust has terms that cannot be modified, terminated, or amended without the grantor named as a beneficiary permit. These special needs trust provides the disabled with funds enhancing their quality of life as it also allows them to be eligible for government programs that are needs-based.

A special needs trust tends to cover a given percentage of someone’s financial needs that the public assistance payments do not cover. These assets that are held in the trust never count when qualifying for the public assistance if not used for shelter or food expenditures. The trust is normally used to pay caretakers, medical expenses, costs of transport, and other expenses. The trust designates a trustee to control the trust, protecting the beneficiary against financial abuse as it gives an oversight making sure that the funds are spent well.

Persons needing the Special Needs Trust?

Persons living with a disability may need help that is lifelong. Such people need health insurance because they may never have a job offering such, hence it is very important to get insured under the federal-state program known as Medicaid. Parents can also decide to leave assets to their children with disability hence making it difficult for these children to be eligible for Medicaid. Therefore, special needs trust ensures a person with disability maintains his or her eligibility for Medicaid, thus supplementing the basic support.

What Special Needs Trusts Pay For

The Special needs trust pay for everything included in the trust documents. These may include “special needs” like luxuries and comforts that the public funds are not able to cover. Special needs trust pays for things that cannot be easily got by reaching one’s pocket. It pays for:

  • Education
  • Counseling
  • Recreation
  • Medical attention

It can also pay for expenses that special needs trust may cover

  • Medical expenses and dental expenses not covered elsewhere
  • Special equipment such as a wheelchair or the special-equipped vehicles
  • Companion payments
  • Insurance
  • Education and training
  • Entertainment and recreation
  • Electronic appliances, computers
  • Travel (with the cost of companion)
  • Therapy and rehabilitation services
  • Payments for companion
  • Insurance
  • Legal expenses or guardianship expenses
  • Burial expenses

There are additional things that a special needs trust can decide to spend on. These are cars, vacation, home, capital for business, ride-share membership (Lyft, Uber), rail pass or bus.

However, special needs trust avoid paying for some things. A medical beneficiary should never be given cash or a cash equivalent by the trustee unless permitted by the special needs’ planner. The trustee and the planner may consult to use the trust funds for either food or shelter for the beneficiary’s best interest. This will cause a possible reduction or complete loss in public assistance. When cash, food, and housing are taken off the table, special needs trust will pay for most of the things that the beneficiary need to supplement the lifestyle. But this may be complicated due to their rules, hence, it is necessary to discuss with the special needs planners about the necessity of the trusts before including payments to anyone.

Why consider a Special Needs Trust

  • Putting trustee in place; there is an ability to appoint a trustee of your choice to help manage the decisions of investment and supervise the distribution of the assets.
  • Maintain government aid for a disabled person; ensure that the disabled person is not named in the will as a beneficiary. This may disrupt the government programs for disabled persons. If the assets are more than $2,000, he or she may lose government assistance. The grantor can protect the beneficiary by directing the inheritance to the special needs trust.
  • Earmarking the assets to support the disabled when alive or at death; a special needs trust are used to provide various needs and initial trust language stipulates the donor’s planned use of funds. It makes the disabled persons live comfortably as they also maintain the group living arrangement.
  • Asset protection from creditors or during divorce; it protects beneficiaries when sued or when they go through separation or divorce. A divorce agreement needs a special needs trust for the ordering of the child support for a disabled child. In addition, it can be used to accumulate assets earmarked for the disabled child’s future use.
  • Preserving the family wealth; a spendthrift beneficiary is limited by the trust. The special need of trust also ensures that wealth is allocated properly. The parents avoid the uneven distribution of wealth.

Most people are not aware of whether their situations warrant this type of trust. In the case of uncertainties, consult with The Mattar Firm to review a given situation before making any step. For more information, kindly contact our special needs planning attorneys.  

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