Law Office of John S. Palmer Attorney at Law

Special Needs Trusts

A Special Needs Trust is designed to accelerate or preserve a disabled beneficiary’s eligibility for Medicaid, SSI, and other types of asset-sensitive government programs; the Trust document can dictate that the Trust funds are to be used to supplement, not replace, any government benefits the Trust beneficiary is currently receiving or may become eligible for in the future.

Special Needs Trusts may be funded with assets belonging to the disabled individual (referred to as a “self-settled” Trust), or with assets belonging to a third party (referred to as a “third party” Trust.)

The beneficiary of any Special Needs Trust may be an adult or a minor, but must be disabled. A Will may dictate that a disabled heir’s inheritance is to be held in a Special Needs Trust; parents of a disabled child often do this, as does a husband or wife with a disabled spouse.

To preserve benefit eligibility, the beneficiary can have no control over assets held by the trust, and there must be an independent trustee with the sole discretion as to the timing and amount of disbursements. Also, any trust funds paid to the beneficiary directly may result in a loss of government benefits. However, the trust funds can be used to pay third parties directly for goods and services not covered by the government benefits, without affecting benefits.

Additional conditions apply to “self-settled” Special Needs Trusts; most notably, the Trust must be created by a parent, grandparent, guardian, or by court order on the beneficiary’s behalf; the beneficiary must be under age 65 when the Trust is created; and the Trust must provide that any Trust assets remaining after the beneficiary’s death will first be used to reimburse the State for Medicaid benefits paid to the beneficiary during his or her lifetime. No such Medicaid–payback provision is required in “third party” Special Needs Trusts funded with assets belonging to someone other than the beneficiary.

We have experience creating both self-settled and third party Special Needs Trusts. We also provide advice and legal representation to Trustees.

If you have any questions or would like to schedule an appointment, please call us at (425) 455-5513, toll free at (877) 455-5513, or info@palmerlegal.com.