Many Minnesota residents have a relative or friend who is physically or mentally disabled. As a result, many Minnesotans may wonder how they can provide financial support for these individuals. It is important to understand special needs trusts and supplemental needs trusts so that one can provide financial resources to a disabled individual without depriving them of their legal rights to government benefits.
What Is the Purpose of a Special Needs Trust or Supplemental Needs Trust?
In general, a trust is a legal device where a trustee manages money or property on behalf of a beneficiary. Special needs trusts or supplemental needs trusts are trusts that are created to provide support for individuals with disabilities without risking their ability to qualify for future government benefits including: social security; SSI; Medicare; Medicaid; and more. If a special needs trust or supplemental needs trust is properly created and operated, the assets that are placed in the trust cannot be considered by the government in determining the beneficiary’s eligibility for government benefits. This is especially important if a disabled individual becomes the recipient of a gift, inheritance, or settlement from a civil lawsuit, because such funds could be transferred to the trust without negating one’s prospects of obtaining government benefits.
What Is the Difference Between a Special Needs Trust and a Supplemental Needs Trust?
The main difference between a special needs trust and a supplemental needs trust is how they are funded. For a special needs trust, the trust’s funds must belong to the beneficiary. Examples are funds received from an inheritance or an insurance policy in which the disabled individual is a beneficiary. For a supplemental needs trust, the trust’s funds can belong to someone other than the beneficiary, such as a relative or friend.
What Kind of Expenses can Special Needs Trusts and Supplemental Needs Trusts Be Used For?
Overall, supplemental needs trusts and special needs trusts must be used for the purpose of supplementing rather than replacing government assistance. Therefore, funds from either of these funds cannot be used for any expenses that government benefits will cover. In other words, the major purpose of these funds is to provide the beneficiary with comfort/luxury expenses while still enabling the beneficiary to receive government benefits for basic necessities.
Do I Need a Lawyer for a Special Needs Trust or a Supplemental Needs Trust?
This blog post only covers the surface of special needs trusts and supplemental needs trusts. If these trusts are not properly drafted and managed, beneficiaries can be deprived of important government benefits. Therefore, it is important to obtain legal counsel to make sure that one navigates all of the legal requirements and pitfalls that come with these trusts. Luckily, the law firm of Dudley and Smith, P.A., including Joseph J. Dudley Jr., has experienced estate-planning attorneys that can help. Contact our firm to determine your prospects of developing a special needs or supplemental needs trust