Blue Bell Special Needs Planning Lawyer Assisting Families Looking To Protect the Future of a Loved One With Special Needs
Serving Philadelphia, Chester, Lehigh, Montgomery, Delaware And Bucks Counties
Planning for the future of a loved one with special needs requires attention to important details, as most individuals with special needs rely on government benefits that have strict income requirements. At the same time, those benefits only cover basic needs. Learn how proper special needs planning can help your loved one live comfortably without losing the right to receive benefits and how a special needs attorney can help.
What Is the Best Way to Leave an Inheritance to a Relative With Special Needs?
Many parents or close relatives of special needs individuals want to make sure that after they pass away, their loved ones will have enough financial resources to support themselves and continue to have a good standard of living. While there are many ways to ensure that a person with special needs can benefit from receiving an inheritance, proper planning is essential to allow the special needs individual to take advantage of receiving an inheritance without losing access to government benefits.
It is common for special needs individuals to be receiving SSI (Supplemental Security Income) or Medicaid benefits in order to pay for their basic living expenses. However, these programs impose strict income limits–each medically needy individual with a disability is only allowed to receive up to $425 per month in order to be eligible to receive Medical Assistance (the Pennsylvania version of Medicaid). If a special needs person inherits a lump sum, the extra windfall is counted against the income threshold and could mean the person would no longer receive government benefits. Proper planning and tools such as a special needs trust can be the answer to leaving an inheritance to a special needs loved one without having them lose access to Medical Assistance or SSI.
What is a Special Needs Trust?
A special needs trust (or SNT) is a type of trust created during your lifetime and designed to hold assets for your loved one with special needs without hurting their ability to receive government benefits. This is because the assets in the trust are not counted towards the income threshold. The money can be used to cover extra living expenses, while SSI and Medicaid cover basics like food, shelter, and medical care.
In addition, SNTs can offer a higher level of protection against creditors and enable you to determine who will inherit the trust after your loved one passes away. You can choose to fund the SNT with many different kinds of assets that can help your loved one enjoy a good standard of living, keeping in mind that most SNTs are irrevocable, and thus, the assets you transfer into the trust will then be owned by the trust.
Are There Different Kinds of Special Needs Trust?
The two most popular types of special needs trusts are first-party SNTs and third-party SNTs. The type of trust to be created for your loved one depends on where the assets to fund the trust will come from. A first-party SNT (sometimes referred to as a “self-settled” trust) will contain assets that originally belonged to the person with special needs. This is often the case when someone becomes disabled after having worked and accumulated their own assets over the years or suddenly received an inheritance or settlement from a personal injury lawsuit.
A third-party SNT, as the name implies, is funded with assets from someone other than the special needs person–usually a parent or close relative. Both types of SNT are useful to help the special needs individual remain eligible for government benefits, but it is important to observe one key difference. In most cases, an individual that has a first-party SNT and has received Medicaid benefits may be subject to a payback requirement. This means that after the individual passes away, the state may require repayment of benefits received, and the assets in the SNT may be used for that purpose. Only after repayment of all Medicaid benefits received can the remainder of assets in the trust be transferred to a new beneficiary according to trust terms. The repayment rule only applies to first-party SNTs, so it is something important to keep in mind when choosing the right type of SNT for your loved one.
What Should the Funds in a Special Needs Trust Be Used For?
While government benefits are supposed to cover basic living expenses, including food and housing, solely relying on those benefits limits the special needs person’s quality of life, as any other expenses are not covered. The goal of a special needs trust is to provide supplemental financial support to sustain a comfortable living for the beneficiary and cover those extra expenses, including school tuition fees, cable bills, phone and internet bills, and medical care not covered by Medicaid.
While an SNT beneficiary may take advantage of the SNT funds for additional expenses, that beneficiary should never be given cash directly from the trust because that can be counted towards their income eligibility. Even if the cash is meant for paying bills, funds in the SNT should be handled carefully in order not to become taxable income. Instead of cash payments, it is best for things like bill payments to be made directly from the trust.
Why Should I See a Special Needs Planning Attorney?
Setting up a special needs trust is just one of many options you have to secure the well-being of your loved one with special needs. By working with a seasoned special needs planning attorney, you can receive the right guidance to make the best choices and ensure your loved one will continue to have a good standard of living after you pass away.
The Pile Law Firm, PLLC, helps families in Blue Bell, PA, and surrounding areas to plan for the future of a child or loved one with special needs. Attorney E. Nego Pile is ready to assist you and answer all your questions about special needs planning. Reach out to us at 610-718-6368 to get started.