Disabled people can qualify for various government programs
that help with their support, such as Medical Assistance, Supplemental
Disability Income, and more. Most of these
programs are “needs-based,” meaning that the recipient must meet income and
asset limitations to qualify.
Occasionally, a disabled person who is receiving government
benefits may suddenly receive money, perhaps through an inheritance or a
settlement due to a car accident or a medical malpractice suit. This additional money can impact program
eligibility. However, Minnesota allows
the creation of a Special Needs Trust, where the disabled person may place the
money that they have inherited or received.
The money in this Trust is disregarded for the purposes of determining
whether the person qualifies for the governmental programs. However, the money is still there to be spent
on things that the government will not pay for or that would otherwise be too
expensive for the disabled person.
Examples can range from vacations to upgraded wheel chairs.
A Special Needs Trust has several technical
requirements. The beneficiary must be
disabled and under age 65 when the trust is established. The trust has to be established either by the
disabled person’s parent, grandparent, or legal guardian, or by the court. The trust may then be funded by the assets of
the disabled person or the disabled person’s spouse, including assets that they
are entitled to but have not yet received.
The trust may also contain assets of other individuals, although it
might be better for such persons to have established a Supplemental Needs
Trust.
The trust must be irrevocable and solely for the benefit of
the disabled person, with a few select exceptions. Distributions can only be made by the trustee
purchasing items or services directly from a third party on behalf of the
disabled person. The money in the trust
may not be used to replace or duplicate money that a governmental program would
otherwise provide. If the disabled
person receives Supplemental Social Security, the money cannot be used for
shelter or food. Use for clothing may
also be problematic.
Once the beneficiary has died, any assets remaining in a
Special Needs Trust go to Medical Assistance to repay any amounts that Medical
Assistance has spent on the beneficiary.
Only if the Medical Assistance claim does not completely exhaust the
assets of the trust can the family or another beneficiary get any money from
the trust.
If you are interested in creating a Special Needs Trust, or
discussing your other financial planning options, please contact Tarrant &
Liska.
