Some special needs individuals are born with special needs. Others acquire special needs status as a result of a medical condition or catastrophic accident later in life. For example, you could become disabled as a result of a tragic car accident, work accident, or other personal injury accident. If you become disabled from an accident, and another party’s negligence caused the accident, you may be entitled to compensation for your injuries. Your settlement, however, could actually cause more problems than it solves because a sudden influx of funds could disqualify you for much needed assistance programs such as Medicaid or Supplemental Security Income, or SSI. Creating a special needs trust may be the solution.
Special needs individuals are often eligible for much needed assistance through state and federal assistance programs such as SSI, Section 8 or public housing, or the Medicaid program. These programs, however, are considered “needs based” programs, meaning that a participant must meet income and asset limits to retain eligibility. Typically, the income limits are not an issue; however, if the participant suddenly receives a substantial settlement or award from a personal injury lawsuit, eligibility will be threatened. If that happens, you could become ineligible and it may be months before you meet the eligibility requirements again. In the meantime, treatment could be interrupted, housing could be threatened, and the little monthly income you get from SSI could stop.
One common solution to this dilemma is to create a special needs trust, also referred to as a supplemental needs trust. A special needs trust is a very specific type of trust that requires very specific language to be recognized as such by federal and state assistance programs. The funds received from the personal injury settlement will go directly into the trust and may be used to “supplement” your maintenance and care. The rules relating to a special needs trust are very clear. The funds can only be used for certain expenses such as vacations, transportation, or hobbies. Basic living expenses continue to be covered by assistance programs.
If you believe that you, or someone close to you, may need to create a special needs trust it is imperative that you consult with an experienced estate planning attorney as soon as possible to ensure that the trust is drafted properly.