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Special Needs Trusts
There is some confusion in the disability community
about the terms to use for a third-party established trust created to
provide resources to supplement governmental benefits, such as Supplemental
Security Income (SSI) and Medicaid. Many use the term "special
needs trust." This may cause some confusion, because the federal
government has used that term to mean a "self-settled" trust,
that is, using the beneficiary's own resources to establish the trust.
This most frequently occurs when an individual is injured in some
manner and settles his legal claim. The tax consequences of this type
of trust are defined in section 468B of the Internal Revenue Code and is
provided for in legislation adopted by Congress amending the Social
Security laws.
Some find it more helpful to use the term "Supplemental
Services Trust" to focus on the purpose for creating the trust.
A Supplemental Services Trust is a third-party created trust and
cannot have any of the beneficiary's assets. This means that parents,
grandparents, other relatives or involved persons can create a trust to
provide services which are not available to a person with a disability from
government benefits. The trust's income or principal or both can be
used to provide vacations for the individual and a caregiver, for example.
Better furniture, better health care, a more comfortable life are
"supplemental" vis-a-vis benefits from SSI or Medicaid.
At the same time, it is very important to be sure
that the attorney drafting the trust, whatever it's called, has experience
with these trusts and knows what language is required to be included to
ensure that the assets of the trust are not deemed available by the
government as an excuse to terminate eligibility for benefits. Not
all attorneys who do estate planning are aware of the different options for
drafting a special needs trust. Some simply go to the state statutes
which may provide a "safe harbor" trust, without realizing that
there are other ways to structure a trust which need to be discussed with
the client. Certainly some of the ways carry more risk to potentially
be counted as an asset, but these are issues for clients to decide with the
help of a properly experienced attorney.
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