If you are a parent or family member of a person with special needs, you are probably aware of government assistance programs available to help your loved one. You may also be aware that these programs come with means-testing formulas that specify how much money someone can have and still be eligible for these benefits programs. A special needs trust is one means of providing some extra money to a person who has special needs without crossing the means test threshold. In this report, attorney Scott Suzuki , whose practice emphasizes special needs planning, explains the types of special needs trusts and how they can benefit a person with special needs.
The purpose of a special needs trust, Suzuki says, is “to enhance the quality of life of the trust beneficiary.” Living is an expensive proposition, and the public benefits programs have not kept pace with the increases in the cost of living over the last forty years. The asset eligibility limit has not changed over that period. The result is that the amounts from benefit programs no longer cover what a beneficiary needs. Rent is a good example. Suzuki points out that in Honolulu, where he lives, a 500-square-foot condominium can easily cost $2,000 per month. That could consume all of the beneficiary’s allowable assets, without allowing for food, clothing, and other necessities.
A trust will help a person maintain eligibility for public benefits. The Supplemental Security Income program, for instance, has a $2,000 asset eligibility limit ($3,000 for a couple) and complicated income rules, as well. A special needs trust set up properly will allow a public funds beneficiary to have some extra money without losing benefits.
Suzuki’s perspective on special needs trusts is that there are two kinds: first party and third party trusts. Suzuki does not consider a pooled trust as a separate type. “A first party trust . . . is funded with the assets of the beneficiary.” The trust has to be created for a beneficiary who is under the age of 65. It must be established by a parent or grandparent or by order of a court. The proceeds of a structured settlement might be a source of funds for a first party trust. A first party trust must also have a payback provision such that, at the death of the beneficiary, any remaining proceeds would be used to repay Medicaid for benefits provided under the program.
A third party trust is funded by assets that do not belong to the beneficiary. The age of the beneficiary is not an issue in this type of trust. There is also no payback provision. A typical type of third party trust is one set up by parents to leave funds to a child with special needs. A pooled trust can be funded with assets from the beneficiary or from third parties.
Suzuki says that these trusts are not one-size-fits-all documents. Forms found online or available from bar associations can be helpful as places to start, but any trust should be customized to fit the beneficiary’s needs. The Special Needs Alliance is a great place to go for information, including finding a lawyer qualified to create and handle a special needs trust.
Scott C. Suzuki is the principal at Scott C. Suzuki, Attorney at Law, Honolulu, Hawaii. In addition to a J.D. degree, he holds a Master of Public Health degree in gerontology. He is an advocate for populations with special needs. Scott is the outgoing president of the Special Needs Alliance, a national, non-profit organization consisting of some of the most credentialed public benefits and disability law attorneys in the country, committed to helping individuals with disabilities, their families, and the professionals who represent them. The Legal Broadcast Network is a featured network of Sequence Media Group.