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SPECIAL NEEDS TRUSTS
By Marisa A. Corvisiero, Esq.
Special Needs Trusts are trusts that are set up by a third
party for the benefit of a disabled or elderly beneficiary. Third party means
that the person funding the trust, the grantor, cannot be the same person as
the beneficiary. These trusts are usually set up by a parent, grandparent,
court etc for the care of the said individuals with the goal of providing funds
for their benefit while sheltering the benefits they receive from the
government, such as Social Security, Medicaid, etc. The reason why the grantor cannot set up this
trust for her own benefit is because the assets that are used by the grantor to
fund the trust are owned and controlled by the grantor, and hence they are
counted as income for the purpose of eligibility to receive the said benefits.
So those types of trusts are called Self Settled Special Needs Trusts and they
will disqualify the beneficiary from eligibility of governmental assistance.
An efficient Special Needs Trust must therefore be settled
by a grantor for the benefit of another who has a disability that qualifies
them for SSI and Medicaid benefits, and for those 65 and older, without
disability, who nevertheless must economically rely on SSI and Medicaid
This type of trust give the person serving as trustee
absolute control over when and how the trust property is spent, as long as it
is spent for the sole benefit of the beneficiary, and it must expressly state
that the grantor intends for the property in the trust to be used to pay for
goods and services that arenít provided by SSI and Medicaid.
Your attorney can create this type of trust for you by
including this language. The trust will take effect when you sign and have the
document notarized. Once a federal Identification Number is obtained (file SS-4
form with the IRS- can be done online at www.irs.com)
then you can use that number to open a deposit account and deposit a small
initial deposit. More funds can be added later. After that you must notify the
appropriate agency that provides the said benefits. They will ask to see a copy
of the trust to ensure that it is a third party trust and that the property
used to fund the trust is not available to the beneficiary as a countable