If you intend to leave money to someone who is disabled, you should consider the creation of a special needs trust. Likewise, if a disabled person obtains money through a personal injury settlement, it may be prudent to create a trust. A special needs trust is a special type of trust that is designed to ensure that a disabled person can be provided for without jeopardizing the individual’s access to important government benefits.
Providing for a disabled person can be complicated, especially for parents and close family members who want to help a disabled loved one maintain the highest possible quality of life for all of his or her life.
Zimmer Law Firm understands the legal tools that are available to parents, relatives, and caregivers who want to provide for someone they love even after they are gone. Our experienced Cincinnati special needs planning lawyers can provide invaluable assistance in determining how best to give a gift to a disabled individual that leaves the recipient better off rather than experiencing a loss.
Using a Special Needs Trust to Preserve Benefits Eligibility
Supplemental Security Income, or SSI, is one of two types of programs that the Social Security Administration uses to provide for those who are disabled. The other type, Social Security Disability Insurance, is available only to people with a lengthy work history or to people who qualify for benefits based on a family member’s work history.
Many people who are seriously disabled are not able to work long enough to earn SSDI benefits. As a result, many people who are disabled collect their monthly income through SSI. SSI is a needs-based program and it is also a means-tested government benefit. In order for someone to receive SSI, that individual must have very few family resources and assets and must have a very low income.
If you wish to give a financial gift to a disabled person, transferring your money or property directly to the disabled individual (either before or after your death) could result in the individual no longer meeting the asset and income limits to qualify for SSI benefits. A personal injury settlement in the name of the disabled individual could also result in the individual no longer meeting resource limits. As a result, the individual could experience a net-financial loss. Other means-tested benefits, including Medicaid, may also be at risk of being lost due to the transfer of cash and assets to the disabled individual.
One way around this loss of benefits is the creation of a trust. The Social Security Administration explains how trusts are viewed under Social Security laws. A trust may be irrevocable or revocable. It bifurcates ownership and use. For example, the trust owns the property but it is used for the beneficiary.
As the SSA explains, when a person uses his assets to establish a trust, it can still count as a resource that can affect SSI qualification. If the trust is revocable, the entire trust is considered a countable resource. If the trust is irrevocable, the portion of the trust from which payment could be made to the SSI-applicant will count as a resource. The exception to this is when a special needs trust is created.
Rules for special needs trusts are set forth in Section 1917(d)(4)(A), which stipulates when a trust may be considered a special needs trust that will not count for determining SSI eligibility. Examples include trusts created by parents or grandparents or legal guardians which provide that the state will repaid from the trust for care provided to the disabled individual upon the disabled individual’s death. There are also other situations designated in this section of the Social Security Act in which a trust may be considered a special needs trust.
Getting Help Creating a Special Needs Trust
There are very strict requirements for creating a special needs trust and you do not want to make a mistake and end up causing your disabled loved one to loose access to essential government benefits. When you begin the process of preparing to give a gift to a disabled relative or friend, you need to speak with an experienced Cincinnati estate planning lawyer to learn about options. Zimmer Law Firm can help you to determine if a special needs trust is the right choice for your situation and our legal team can provide assistance with creating and funding the trust.
To learn more about special needs trusts and estate planning, join us for a free seminar. When you are ready for personalized legal advice that is aimed specifically at allowing you to leave a gift for your loved ones, give us a call at 513.721.1513.