Special Needs Trusts

Special Needs Trusts, also known as Supplemental Needs Trusts or Supplemental Benefits Trusts, are a valuable tool for families with disabled or special needs loved ones. These trusts allow you to set aside resources to improve their quality of life without jeopardizing their eligibility for government benefits.

Types of Special Needs Trusts

There are two main types of Special Needs Trusts, both of which are irrevocable:

• Self-Settled Special Needs Trust: Also known as a (d)(4)(A) trust, this trust is funded with assets owned by the beneficiary, such as investments, inheritances, gifts, or legal settlements. However, there is a payback provision requiring reimbursement to MO HealthNet (Medicaid) upon the beneficiary’s death or trust termination, if the beneficiary received Medicaid benefits.
• Third-Party Special Needs Trust: Funded with assets from someone other than the beneficiary (family members, friends, etc.), these trusts do not require payback provisions to MO HealthNet. This makes them a popular option for leaving an inheritance to special needs children or adults.

Important Note: Special rules apply to beneficiaries over the age of 65.

The Key to the Special Needs Trust: Maintaining Benefit Eligibility

The primary purpose of a Special Needs Trust is to supplement, not replace, government benefits like Medicaid, Supplemental Security Income (SSI), or public housing. The trust cannot be used for expenses covered by these programs, such as utilities or housing, or it will jeopardize the beneficiary’s eligibility. The trust should be drafted with specific language outlining these limitations. The trustee has a legal responsibility to ensure funds are used appropriately.

Benefits of a Special Needs Trust

• Maintains Eligibility for Public Benefits: A Special Needs Trust allows you to set aside money for the beneficiary’s extra needs without affecting their access to government assistance programs.
• Improves Quality of Life: The trust funds can be used for expenses not covered by government benefits, such as education, counseling, recreation, and entertainment, enhancing the beneficiary’s overall well-being.
• Provides for the Future: A Special Needs Trust ensures your loved one has access to financial resources even after you’re no longer there.

By understanding the different types of Special Needs Trusts and their functionalities, you can make informed decisions to secure your loved one’s future and well-being.