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Creating A Special Needs Trust For A Family Member With Disabilities

Last updated on September 27, 2022

A disabled person cannot qualify for government assistance if their income or assets exceed certain limits. A special needs trust preserves eligibility for government programs while providing spending money and paying for “extras” to improve the person’s quality of life.

At Gregory L. Heidt, Attorney At Law,I have helped many families in Erie and western Pennsylvania create special needs trusts for their loved ones who have physical or mental disabilities. With 40 years of experience in estate law, I can make sure the trust is set up properly to serve the needs and protect family wealth.

What Is A Special Needs Trust?

A special needs trust, also referred to as a supplemental needs trust, is an estate planning instrument that gives the disabled person access to funds without disqualifying them for Medicaid, Medicare or Social Security benefits. That eligibility is critical if the person is receiving nursing home, group home, assisted living or home health care services.

The assets are set aside in a trust, separate from the estate of the disabled person. A fiduciary (trustee) oversees the trust and authorizes distributions to the disabled person or on their behalf. The disbursements can pay for things that government assistance does not cover, such as furnishings, personal care items, personal electronics, medical equipment, travel expenses, movies and recreational outings, restaurant meals and pocket money.

The Two Types Of Special Needs Trusts

A third-party special needs trust is the most common scenario. This is funded by the parents, grandparents or other relatives on behalf of the special needs beneficiary. It is an irrevocable trust, meaning the gifting parties cannot access or recall those funds. However, we can set up the trust so that, if the beneficiary dies, the money reverts to those who funded the trust. If not set up properly, the trust may have to reimburse Medicaid, Social Security and/or Medicare for services rendered, which in most cases would eat up the entire trust.

A first-party special needs trust may be appropriate when the disabled person has significant assets of their own, from inheritance or from the proceeds of a lawsuit. The beneficiary funds their own trust, but they turn over access and control of those assets to the fiduciary. The key difference is that, upon death, the first-party trust must reimburse Medicaid, Social Security and Medicare.

Do We Need A Special Needs Trust?

The main purpose of such trusts is to preserve eligibility for government benefits such as Supplemental Security Income (SSI) and Medicaid subsidy of nursing care. The added value is that a special needs trust protects assets from creditors, lawsuits, predatory relatives and scammers.

I am Gregory L. Heidt, a solo attorney who has practiced in this field for decades. I am happy to sit down with you to discuss your family member’s special needs and how we can protect family assets without jeopardizing their eligibility for public assistance. I invite you to contact me online or call my Erie law office at 814-580-9495.