Special Needs Trusts for Disabled Individuals

One of the most unfortunate things that may happen when a parent or grandparent makes a disabled child the beneficiary of an estate (or when a disabled child becomes an heir if there is no will) is that the child loses eligibility for SSI (Supplemental Security Income) and Medicaid due to excess income and resources. Some parents and grandparents may leave their assets to the child’s sibling and extract a promise from the sibling to take care of the child, but this informal arrangement is not legally binding and can backfire when the sibling develops financial problems or experiences a divorce, for example. One alternative is to create a third party special needs trust for the disabled individual.

A third party special needs trust is intended to supplement but not stand in the place of public benefits. It is intended to meet the needs of the disabled individual that cannot be met by public benefits which provide only basic food, shelter, clothing, and medical care. Some examples of such supplemental needs include dental care, travel, cultural experiences, education, companion care, special equipment and programs of training for which there are no private or public benefit program funds otherwise available. Disbursements by the trustee are purely discretionary. A third party special needs trust may be created by will, revocable living trust, or irrevocable trust. A separate trust agreement may be used to allow other family members in addition to the Grantor to make gifts for the benefit of the disabled individual. A testamentary (created by will) third party special needs trust can be helpful for a spouse who wishes to provide for a disabled spouse.

Our law firm can help you determine whether a special needs trust is an appropriate part of your estate plan and whether it should be created by will, revocable living trust, or irrevocable trust.