If a disabled person under the age of 65 receives Social Security or other government benefits they cannot own assets with a total value over $2,000.
Events such as lawsuit settlements and inheritances can often put a person’s benefits at risk.
To allow for the continuation of government-provided benefits, and the utilization of all available funds for care, many states have passed legislation that allows for the creation of Special and Supplemental Needs Trusts.
Special Needs Trust
There are two main differences between these trusts. The disabled person themselves funds a Special Needs Trust and once they die, the remaining funds are used to reimburse the State for any medical expenses incurred on the deceased’s behalf before being distributed.
Supplemental Needs Trust
Comparatively, a Supplemental Needs Trust is funded by assets belonging to others such as a spouse, parent, or grandparent and is distributed along guidelines set by those funding it. Supplemental Needs Trusts are frequently established in a parent’s will. This method of creation in funding is called Testamentary Supplemental Needs Trust.
However, once established both types of trust serve very similar purposes and work in very similar ways.
These trusts are designed to “supplement” but not replace benefits provided by the government.
They exist to fund the reasonable living expenses of a disabled person and fill in the gaps left by government benefits. The government will not pay for a disabled person to go to the movies, eat at a restaurant, or continue to provide benefits if standard medical or other treatments are being privately funded.
But, a properly planned trust would allow a disabled person to provide for their own basic needs, entertainment, and costs of living, while still receiving government aid.
For example, Medicare does not pay for eyeglasses or clothing. These and other needs can be provided for under a Special or Supplemental Needs Trust.
Understanding Supplemental and Special Needs Trusts is the first step to ensuring future financial stability for any loved ones receiving disability benefits from the government.
Retitling assets in the name of a Trust, or naming the Trust set up for a loved one as a beneficiary will allow a person to continue to receive any due benefits and whatever assets to which they are entitled.
For help planning your or a loved one’s future, contact Abraham & Bauer.
Planning Ahead is a Gift to Your Loved Ones!
Mr. Abraham is an experienced attorney and founding member of the Law Office of Richard K. Abraham. The Sparks, MD office of the firm concentrates its practice in Estate Planning, Elder Law, Probate, Medical Assistance (Medicaid), Guardianship, Asset Preservation and Fiduciary Representation.
He is an active member in a number of professional organizations that focus on law, the senior community, and estate planning. He works with clients in Central Maryland, especially in Towson, Hunt Valley, Lutherville/Timonium, Parkville, White Marsh, Bel Air & Northern Baltimore City.
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