ESTATE PLANNING PLYMOUTH, MN
Disability Planning Trusts
What are ``Disability Planning Trusts``?
When a person has or develops a disability, they often need to utilize government benefits, such as Medical Assistance (“MA” – Minnesota’s version of Medicaid) or SSI. Those and other programs may have various “impoverishment requirements” – limits to total available assets and monthly income. If a person on such a program receives a large inheritance outright, they risk losing access to their benefits. This outcome can be avoided, however, with proper estate planning and establishing a Special Needs Trust, Supplemental Needs Trust, or Pooled Supplemental Needs Trust.
What are ``Disability Planning Trusts``?
When a person has or develops a disability, they often need to utilize government benefits, such as Medical Assistance (“MA” – Minnesota’s version of Medicaid) or SSI. Those and other programs may have various “impoverishment requirements” – limits to total available assets and monthly income. If a person on such a program receives a large inheritance outright, they risk losing access to their benefits. This outcome can be avoided, however, with proper estate planning and establishing a Special Needs Trust, Supplemental Needs Trust, or Pooled Supplemental Needs Trust.
What are ``Special Needs Trusts`` and ``Supplemental Needs Trusts``?
Special Needs Trusts and Supplemental Needs Trusts (sometimes called Third Party Special Needs Trusts) are irrevocable trusts that benefit a person with a disability. These special irrevocable trusts allow the assets to supplement the government benefits being received by the beneficiary without reducing or causing the beneficiary to lose their benefits.
Special Needs and Supplemental Needs Trusts are intended to fill the gaps that benefit programs cannot fill. This may include paying for such things as, for example:
- Trips or vacations
- Entertainment
- Education and tutoring
- Goods and services to improve the quality of life
- Tickets to sporting events
- A personal care attendant
- Dental care
- Advanced or elective medical procedures
- Accountant and attorney fees
The trust assets are used to supplement the benefits received by the beneficiary (and just not supplant them).
So Many Trust Types – What is the Difference?
In many respects, the Special Needs Trust and Supplemental Needs Trust are the same – they allow a person on disability benefits to have access to funds beyond the program impoverishment requirements that can be used to supplement their government benefits. There are a few key differences.
A “supplemental needs trust” is the most common type of disability trust. It must be funded with assets owned neither by the individual with the disability nor their spouse. Usually, they are funded with assets from the individual’s parents, grandparents, siblings, or friends. When the beneficiary dies, the remaining assets in the trust can be distributed in accordance with the terms of the trust, so may go to family and friends.
A “special needs trust” is one funded with assets owned by the individual with the disability or their spouse. When the beneficiary dies, the remaining assets must be paid to the State as reimbursement for government benefits received.
An Important Estate Planning Tool for Families
A Supplemental Needs Trust gives someone the ability to leave a gift or inheritance to a person on Medical Assistance or SSI without making them ineligible for the program. The trust can be established as part of a revocable living trust, as a testamentary trust in a will, or an independent irrevocable trust.
Supplemental Needs Trusts are complicated to set up. There are numerous requirements and limitations that, if not adhered to, can make the trust ineffective (and possibly conflict with the beneficiary’s benefit program). Here at Signature Law, we ensure you have effective counsel drafting and setting up the trust — giving you peace of mind when it comes to providing for your family and friends.
[H]e walked me through every step and explained everything in a way that I could understand….He is a good man who helped me set my affairs in order for my family. Because of that I sleep better at night and don’t worry about it during the day. I have recommended him to many people that I know. I would hire him again.
– Roxeanne M.
Ready to Get Started?
Supplemental Needs Trusts can be a vital estate planning tool if one of your heirs will be someone with a disability that is receiving government benefits. In addition, Special Needs Trusts are an important tool for managing resources and finances. If you have questions about Supplemental Needs Trusts, we can help. Simply schedule a free consultation where we’ll answer any questions and learn more about your unique needs.