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Providing for a loved one with special needs

On Behalf of | May 26, 2020 | Estate Planning |

A special needs trust is a document intended to manage assets for a beneficiary without compromising government benefits such as Medicaid and Supplemental Security Income. There are two types of special needs trusts. The first-party trust holds money for someone’s inheritance or personal injury settlement. A third-party trust is for those who want to provide for a loved one with special needs. A parent of a disabled child will more than likely want to set up the latter. 

The Social Security Administration outlines the rules of a special needs trust to allow for the beneficiary’s continued use of Medicaid and SSI benefits. To protect the future needs of a disabled child, individuals of first- and third-party trusts may want to pay attention to these exceptions. 

Creators of a trust 

The SSA allows an exception for trusts created by: 

  • The disabled person’s parents 
  • The disabled person’s grandparents 
  • The disabled person’s legal guardians 
  • The court 
  • The individual (only for first-party trusts) 

In-kind support and maintenance 

In-kind support and maintenance is a disbursement made by the trustee to the beneficiary for food and shelter. The SSA uses the amount of this disbursement to figure the amount of SSI benefits. In-kind support and maintenance includes: 

  • Mortgage payments including property insurance 
  • Rent 
  • Property taxes 
  • Gas 
  • Electricity 
  • Water 
  • Sewer 
  • Garbage removal 
  • Heating fuel 

Other expenses 

There are some expenses the SSA does not consider income. Those amounts do not apply toward in-kind support and maintenance. These expenditures may include: 

  • One automobile 
  • Accounting or legal services 
  • Appliances 
  • Public transportation costs 
  • Internet service 
  • Computers and software 
  • Academic or recreational classes 
  • Doctors not covered by Medicaid 
  • Dental work not covered by Medicaid 
  • Car maintenance 
  • Cellphone payments 
  • Vacations or travel 

The beneficiary of the trust cannot directly receive monetary distributions. The trustee, a person chosen by the parent or guardian, administers and handles the assets within the trust. A beneficiary of a special needs trust must be under age 65 and disabled.