Supplemental Security Income, Medicaid and other needs-based government programs provide a safety net for disabled individuals. While these programs often cover basic living expenses and medical care, they do not typically leave much money for other expenses.
If you want to preserve your disabled loved one’s eligibility for public assistance, your estate plan probably cannot leave assets to him or her. After all, to qualify for government programs, your relative likely must have meager assets and income.
A legal workaround
As part of your overall estate plan, a special needs trust may be the legal workaround you need to preserve access to public benefits while improving your loved one’s quality of life.
This type of trust holds funds for the use of your relative without transferring ownership to him or her. As a result, funds in the trust usually do not count as income when applying for public assistance.
Acceptable expenses
If your disabled relative uses disbursements from the special needs trust on ordinary living expenses or medical care, he or she may lose public assistance. That is, funds from the special needs trust must only cover supplemental expenses. Some examples of these include the following:
- Hobby, entertainment, athletic and recreational expenses
- Travel costs
- Tuition and other education-related fees
- Out-of-pocket medical care
Critical oversight
You may have some concern your loved one may inadvertently use funds from the special needs trust on an inappropriate expense. Luckily, when you create your special needs trust, you name a trustee to oversee it.
In addition to managing the fund, the trustee provides critical oversight of benefits eligibility. Specifically, the trustee is only likely to approve disbursement that do not conflict with your loved one’s benefits.
