A special needs trust allows a disabled individual to get benefits from the trust funds while still receiving public benefits like Medicaid and Supplemental Security Income (SSI).
The special needs trust is a highly beneficial estate planning instrument for parents having a child with special need. As the child grows into adulthood, they would typically still need as much financial support they can get. Although Medicaid provides basic home care for disabled children, you may want your child to have a mechanical wheelchair, mechanical bed, special therapy, and other instruments to improve their quality of life more than what Medicaid offers. But sadly, bequeathing assets outright to your disabled child may ruin their eligibility for Medicaid. Consequently, the money you transfer to them would now be covering what Medicaid is originally supposed to cover.
But with a special needs trust, you can enable your child enjoy both Medicaid benefits and a higher quality of life.
What can a special needs trust funds be used for?
Notably, you cannot use funds from a special needs trust for just anything, like buying a house or a car. While Medicaid takes care of the child’s basic needs, funds from the special needs trust will cater to those supplemental needs not covered by Medicaid, such as:
- Mechanic beds
- Special therapies
- Accessible vans
- Walk to the park and other recreational experiences to enrich the individual’s life
- Occasional dine-in at the restaurant, etc.
Supplemental needs that special needs trust funds cannot be used for include:
- Mortgage payments and property tax
- Allowance cash given directly to the disabled individual
- Frequent restaurant meals
If funds from a special needs trust are used for the above basic needs, they would be considered income and this would interfere negatively with their Medicaid eligibility.
Nonetheless, it is sometimes difficult to tell where the line is between what trust funds can and can’t be used for. It becomes important you consult with a special needs trust attorney to avoid making costly mistakes.
Who manages the funds in a special needs trust?
As with other types of trust, a special needs trust must have a trustee who manages the trust assets on behalf of the disabled.
Should I fund the special needs trust while I’m alive?
Assets will most often go into your child’s a special needs trust when you pass away. Other relatives and friends may also leave assets when they die. But you can choose to fund the trust while you are alive by making gifts into the trust. However, gifting in Long Island imposes some tax liabilities you wouldn’t want, and it’s important you seek counsel from a specialized attorney.
Types of special needs trusts
There are the basically three types of special needs trust in Long Island. They are:
- The self-settled special needs trust – this type of trust is one funded by the disabled individual’s assets, probably those gotten from judgment in a personal injury lawsuit.
- Pooled trust – A trust managed by a non-profit organization for the benefit of several disabled individuals.
- Third-party trust – one created for a disabled individual by their parents or other loved one.
When a put assets in a special needs trust, you are certain the assets will be used specifically for those things for which the funds are intended (supplemental needs)
Special needs trusts are irrevocable trusts, and as such, the assets cannot be touched by creditors, tax, Medicaid, or any winner from a civil lawsuit.
It gives the third-party a chance to continue supporting their disabled loved one even after death.
If done right, the special needs trust does not interfere with Medicaid eligibility.
When executing a special needs trust, it is paramount that you use the right terms to ensure the trust does exactly what you want it to do. It must also comply strictly to the laws of Long Island State for validity. Note that every special needs trust must be created before the beneficiary attains the age of 65.
There are many things involved with special needs trusts in Long Island, and it is crucial you get it right. One silly mistake can bring your good intentions to naught. Having an experienced Long Island attorney working with you can bring you peace of mind that everything will be done right
Get in touch with a special needs trust attorney near you today.