New York Estate Planning & Elder Law Blog
Special needs trust are a type of trust by which the beneficiary is provided for through the trust income, but has no control over the distributions of the trust. Generally, special needs, or supplemental needs trusts, have been used to provide for those loved ones with disabilities or who are unable to care for themselves any longer.
Once a special needs trust is established, family or a loved one can put the assets in the trust for the benefit of the beneficiary in order to provide them with any number of resources they feel the beneficiary deserves. The trust funds can be used to compensate for additional medical bills not fully covered by insurance, for personal leisure, travel, or anything the grantor feels the beneficiary may want or benefit from.
Eligibility for Benefits & Being a Beneficiary
While many families seek to leave certain assets to family members, leaving assets or setting aside funds in the disabled individual’s name, can lead to complications when receiving government benefits. In order to remain eligible for government benefits, the intended beneficiary must keep their personal assets at a minimum and thus cannot be given gifts by the family or on behalf of someone else if they seek to remain on Medicaid.
In fact, in order to qualify for supplemental security income, the intended beneficiary must possess no more than $2,000 in personal assets. Appointing an experienced trustee, whether it is an attorney, a corporate trustee, financial institution or knowledgeable family member, helps to ensure the beneficiary keeps his or her financial standing within the appropriate guidelines.
Trustee Duties
When establishing a special needs trust, the trustee is to be given full control over the assets of the trust and their distribution to the beneficiary. This means that the beneficiary or any agent operating under a capacity for the beneficiary, cannot request distributions from the trust, the trustee has full autonomy and discretion to decide when and if distributions are made, thus choosing the appropriate trustee is crucial in this type of trust.
In order for the beneficiary to remain eligible for public benefits, he must not be able to reach into the trust, which means he or she has no ability or authority to revoke or amend any terms of the trust. Lastly, in order to further comply with eligibility for public benefits, the trustee cannot give cash gifts to beneficiary due to their automatic deduction from government benefits.