Gayle Reeves' Blog

Special Needs Trusts

Gayle A. Reeves - Tuesday, September 01, 2015

I am seeing more and more people in my office who either have a disability or who have a child with a disability.  Many times the disabled individual is receiving public benefits such as Social Security Income (SSI) and Medicaid.  It used to be that the simple answer was to not leave anything to the disabled person.  However, there are many estate planning options available that will provide much better options.  The most common is to create a Trust that meets the statutory requirements to permit a disabled beneficiary to receive the benefits of the inheritance without affecting their public benefits.

            Special Needs Trusts, which may also be referred to as Supplemental Needs Trusts, are a valuable estate planning tool that may be created to hold assets for the benefit of a disabled person.  This Trust is typically created by parents to benefit their disabled child.  It may be funded during the parents’ lifetime or upon their deaths.  The advantage of this type of trust is that the money may be used to provide for those things not paid by public benefits, such as participation in recreational or cultural events, travel and vacations, visiting friends, cost differential between a shared room and a private room, equipment such as telephones, cable television, camera, magazine and newspaper subscriptions, and small amounts of spending money.  When properly created and funded, this type of Trust provides enhances the life of the disabled individual.  The advantage of this type of Trust is when the disabled individual dies, any monies remaining in the Trust may be distributed to other family members, or whomever the parents designate.  This Trust is administered by a person of the parents’ choosing.

            If a disabled person receives an inheritance directly there are still some options to prevent their public benefits from being affected.  These types of Trusts are known as Medicaid Payback Trusts and Pooled Medicaid Payback Trusts.  Both types of Trusts are created with the disabled person’s money.  Upon his/her death, the remaining monies are first paid to the State of Ohio to reimburse Medicaid.  If there is anything left, it may be distributed to designated beneficiaries.

            As my clients age, so do their disabled children.  Right now I have several parents in their 80’s with disabled children in their 60’s.  The parents have always taken care of these children.  Many have never applied for public benefits for their children, but have personally shouldered the high cost of taking care of their children.  The questions these parents pose is “What will happen to my child when I die?”  Will the child be able to stay in the home?  Will they move in with a sibling?  Who will make sure my child will receive the proper care?  All of these worries may be set aside by putting a plan into place now.  Creating a Special Needs Trust is one of the easiest ways of making sure you child will continue to receive the care they deserve in a comfortable environment, even when you are not around to do it yourself.