But for some parents, it’s not that simple. If you have a child or other loved one with special needs, you might worry about how they can support themselves after you’ve gone.
That’s where a special needs trust comes into play. This is a trust set up to help a disabled person who receives government benefits such as Medicaid or Social Security. It is administered by a trustee, who can be a relative, friend, or someone you designate to handle the trust.
When you put money in a special needs trust for them, you’re making sure they can continue to receive government benefits – which are tied to a certain income and asset level – while still covering all their needs.
In this blog post, we’ll look at what can and can’t be paid for by a special needs trust.
With a special needs trust, a person – or their trustee – can buy what are known as “non-countable” assets that won’t affect their SSI or Medicaid income.
These assets include:
- A home – Owning one home as a primary residence won’t impact your loved one’s Social Security. But if they receive Medicaid but no SSI, the value of the home will be limited to $500,000 or $750,000, depending on the state.
- A car – The beneficiary can own a motor vehicle, regardless of its value.
- Home furnishings and personal affects – This category is wide open. Anything your loved one can fit in their home is included.
- Work-related property – If your loved one works or runs a business, they can own property that aids in that work. However, there are limits on the value of these items, depending on the rate of return they bring.
- Self-improvement – Money from a special needs trust can be used to help your loved one go to college, receive vocational training or launch their own business. This is according to SSI’s Plan for Achieving Self-Support (PASS) program.
People with more than $2,000 in countable resources cannot receive SSI. Therefore, special needs trustees need to avoid giving a beneficiary more than that amount.
Countable assets include:
- Checking and savings accounts
- Investment accounts
- IRAs, 401(k) accounts and other retirement funds
- Stocks and bonds
- Vacation homes
- Rental properties or other real estate beyond the beneficiary’s home
There are also some basic expenses that should not be paid with special needs trust money without first talking to your attorney. These include food or groceries, rent or mortgage payments, property taxes, utilities and utility hook-ups, and homeowner or condo association fees.
Special needs trusts are an essential estate planning tool, but like any important financial matter, it’s not something you should try to do by yourself. If you need help establishing one of these trusts, contact the attorneys at Newman Elder Law.
Our legal team has spent years helping clients guard their assets. When you work with us, you’ll come away with a special needs trust that can look after your loved ones long after you’re gone.