Yes, an irrevocable trust can be a powerfully effective tool to support a disabled child, offering both financial security and preservation of essential government benefits. These trusts, specifically designed as Special Needs Trusts (SNTs), allow assets to be held for the benefit of a disabled individual without disqualifying them from crucial programs like Supplemental Security Income (SSI) and Medicaid. The key lies in structuring the trust to ensure it doesn’t count as an asset available to the beneficiary for eligibility purposes. Approximately 1 in 4 adults in the United States live with a disability, making careful planning essential for their long-term care and financial wellbeing, and SNTs are at the forefront of that care.
What are the different types of Special Needs Trusts?
There are generally two main types of SNTs: first-party or self-settled trusts, and third-party trusts. First-party SNTs are funded with the disabled individual’s own assets – perhaps from an inheritance or a personal injury settlement. These trusts *must* include a “payback” provision, meaning any remaining funds upon the beneficiary’s death are used to reimburse the state for Medicaid benefits received. Third-party SNTs, on the other hand, are funded with assets from someone *other* than the disabled individual – usually parents or other family members. These do not require a payback provision. “It’s like building a protective shell around their resources,” Ted Cook often explains to clients, “ensuring they receive the care they need without jeopardizing vital assistance.” Currently, over 13.7 million Americans receive SSI, highlighting the sheer scale of those who might benefit from a properly structured SNT.
How does an irrevocable trust protect government benefits?
The irrevocability of the trust is crucial. Once assets are transferred into an irrevocable trust, they are no longer considered the beneficiary’s property. This is vital because SSI and Medicaid have strict asset limits. In 2024, the SSI asset limit is $2,000 for an individual and $3,000 for a couple. Any assets exceeding these limits can lead to benefit ineligibility. An SNT allows assets to grow and be used for the beneficiary’s supplemental needs—things not covered by government programs—such as therapies, recreation, travel, and specialized equipment. I recall working with a family where their son, Michael, had cerebral palsy. They’d inherited a substantial sum but were terrified of disqualifying him from Medicaid, which was covering his extensive therapy. We established a third-party SNT, and Michael continued to receive the care he needed, while the trust funded enriching activities like adaptive skiing lessons.
What happens if you don’t establish a Special Needs Trust?
I once consulted with a woman named Sarah whose mother had recently passed away, leaving her a considerable inheritance. Sarah’s brother, David, had Down syndrome and relied heavily on SSI and Medicaid. Without a SNT, the inheritance would have immediately disqualified David from benefits, leaving Sarah in a terrible predicament. She faced the heartbreaking choice of either disclaiming the inheritance or having David lose essential support. It was a stressful situation, and could have been easily avoided with proactive planning. Approximately 61 million adults in the US have a disability, and many face the risk of losing benefits if inheritance or settlements aren’t handled correctly. The lack of planning not only caused immediate financial hardship, but also a great deal of emotional distress for the entire family.
How can Ted Cook help establish a Special Needs Trust?
Establishing a Special Needs Trust is a complex legal process, and it’s vital to work with an experienced estate planning attorney like Ted Cook. He can guide you through the intricacies of trust law, ensure the trust is properly drafted to meet your specific needs, and help you navigate the rules and regulations surrounding SSI and Medicaid. After Sarah’s situation, she came to Ted. Together they were able to establish a first-party SNT, allowing David to receive the inheritance without losing access to his benefits. “The peace of mind that comes with knowing your loved one is protected is priceless,” Ted often says. By carefully planning ahead, families can ensure that their disabled children receive the care and support they deserve for years to come, preserving both their financial security and access to crucial government assistance.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
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