By Revis, Hervas & Goldberg P.A.
There are many individuals who receive public benefits from the State and Federal government, such as medical assistance through Medicaid. Without proper estate planning, a death in the family could cause those individuals to lose their right to receive public benefits.
Public benefits are typically granted based on an individual’s income and assets. Should a recipient of public benefits come into a windfall, such as by receiving an inheritance, then the receipt may disqualify the beneficiary by pushing their income or assets over the allowable threshold. To prevent this from happening, one option is to set up a Special Needs Trust.
A Special Needs Trust is often a stand-alone trust which has an appointed Trustee, who is either an individual or an institution. The Trustee holds all of the funds it receives for the benefit the beneficiary / public aid recipient. The Trustee is bound by the terms of the Special Needs Trust. A properly drafted Special Needs Trust will direct the Trustee to distribute funds to the beneficiary / public aid recipient only to supplement their public benefits and not to supplant them. Essentially, the Trustee should provide only those items which are above and beyond the items provided by public assistance.
A Special Needs Trust can also be created upon death through a provision in a Will, which is known as a testamentary trust. The Will should outline all of the terms of the Special Needs Trust so that the Personal Representative and Trustee may work together to establish and fund it.
A properly prepared Special Needs Trust will allow the beneficiary / public aid recipient to continue to receive their benefits. The income and assets in the Special Needs Trust will not be counted against the recipient for purposes of qualifying for public benefits.
Setting up a Special Needs Trust can be very tricky. If it is something you are considering, you should contact a qualified attorney.