Self Settled Special Needs Trusts

Self Settled Special Needs Trusts

Normally, in order for a person to qualify for Medicaid or Supplemental Security Income (SSI), the person must have very few assets. If the person has assets over the qualification threshold, typically the person must spend down their assets first. One way to avoid having to spend all of your assets and still qualify for Medicaid, SSI and other government benefits is to create a Self-Settled Special Needs Trust.

What is a Self Settled Special Needs Trust?

A Self-Settled Special Needs Trust is a trust established using the funds of the special needs person for the benefit of the special needs person. A Self-Settled Special Needs Trust  specifically allows for these trusts to be considered an exempt asset for purposes of qualifying for Medicaid and SSI.  In other words, by setting up a Special Needs Trust, a disabled individual is able to have access to their own funds and still qualify for government benefits.

The prime reason why the government allows Self-Settled Special Needs Trusts is because when the special needs person dies, whatever is remaining in the trust must be used to pay back any Medicaid expenditures that have been made over the lifetime of the person. This pay back provision is the biggest difference between First Party Special Needs Trusts and Third Party Special Needs Trusts.One of the most important features of a Self Settled Special Needs Trust is that it can ONLY be for the benefit of the disabled individual who is funding the trust.

Who Can Be a Beneficiary of a Self Settled Special Needs Trust?

In order to establish a Self Settled Special Needs Trust for a person, that person must be a disabled individual under the age of 65 years.

Administration of a Self Settled Special Needs Trust

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.

Creating a Self Settled Special Needs Trust

Who can create a self settled special needs trust varies slightly based upon where you live and your particular situation, but usually it can be established by a judge, a court-appointed guardian for the special needs person, the parent of a special needs person or the grandparent of a special needs person.

Additionally, a recent change in the law finally allows the beneficiary to actually create a trust for himself or herself.  This is important because sometimes people don’t have a relative to create the trust for them and they were forced to go to Court to established the trust.  Remember, there are many types of disabled individuals who can qualify for government benefits.  The old rules prevented physically handicapped, but mentally competent individuals, from establishing their own trusts.

Other Names for Settled Special Needs Trusts

Settled Special Needs Trusts are also frequently called a First Party Special Needs Trust, a Supplemental Benefits Trust or a (d)(4)(A) Trust because the Social Security Act, Section 1396p(d)(4)(A).

Finding a Special Needs Trust Attorney

Like many areas of the law, special needs trust planning requires exceptional knowledge and experience in handling such matters.  Mistakes in this field can cause a disabled individual to lose their government benefits.

Kevin Pollock is the 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.

For more information on Special Needs Planning, please visit my blog: Kevin A. Pollock BLAWG