Normally, in order for a person to qualify for Medicaid or Supplemental Security Income (SSI), the person must have very few assets and very little income. If you have a loved one who is receiving Medicaid or SSI, you should not give them money directly as it will cause them to lose their benefits. When preparing your Will, Life Insurance Trust, or Revocable Living Trust, we highly recommend that you insert special provisions into these documents so that money does not go to a special needs person outright. These provisions form the basis of a Third Party Special Needs Trust (also commonly referred to as a Supplemental Needs Trust).
If you looking to create a Third Party Special Needs Trust for a relative who is receiving government benefits, I would strongly recommend that you find someone who focuses in this area. Terminology can be very confusing as many people mix up First Party Special Needs Trusts with Third Party Special Needs Trusts. The biggest difference is that First Party Special Needs Trusts (also known as Self Settled Special Needs Trusts) require that Medicaid be paid back when the beneficiary dies, a Third Party Special Needs Trust does not have that requirement.
Special Needs Trust Administration of all Special Needs Trusts can be very complex because those trusts are limited in what they can pay for by statute. Special Needs Trusts can generally not pay for food, shelter, electricity, gas or water and it may not pay for anything that can be converted into food, shelter, electricity, gas or water. Additionally, cash should almost never be distributed to a beneficiary from the trust and there are special rules about a trust owning a home.
Kevin Pollock is the elder law attorney in charge of the firm’s Special Needs Planning Department. Attorney Kevin Pollock has focused on Wills, Trusts & Estates since 2000 when he received his master’s degree in taxation.
