In preparing for your wellness it is important to understand Special Needs Trust. A special needs trust is created to ensure that beneficiaries who are disabled or mentally ill can enjoy the use of property which is intended to be held for their benefit.[1] In addition to personal planning reasons for such a trust (the person may lack the mental capacity to handle their financial affairs) there may be fiscal advantages to the use of a trust. Such trusts may also avoid beneficiaries losing access to essential government benefits.
A trust for a disabled beneficiary may be set up in any of the common law countries or other countries which recognise the concept of the trust. They have particular advantages in legislation in relation to both taxation and state benefits in, for example, in relation to the provision of healthcare, long-term care and nursing home benefits under the state-sponsored Medicaid welfare system in the United States of America.
Special needs trusts can provide benefits to, and protect the assets of, the physically disabled or the mentally disabled. Special Needs Trusts are frequently used to receive an inheritance or personal injury settlement proceeds on behalf of a disabled person or are founded from the proceeds of compensation for criminal injuries, litigation or insurance settlements.
A common feature of trusts in all common law jurisdictions is that they may be run either by family members (a private trust) or by trusteesappointed by the court. Especially where a trust is to be established for a disabled child or young person, great care is generally taken in the choice of appropriate trustees to manage the trust assets and to deal with future replacement appointments. The use of a private discretionary trust can not only be more efficient in terms of taxation and access to government benefits but can also allow for more efficient investment of funds held than where funds are held by a court official However where no appropriate trustees can be found, e.g. on the death of existing trustees, the court will intervene.
WHY USE A SUPPLEMENTAL NEEDS TRUST?
To Preserve Governmental Benefits And Protect Assets...
A Supplemental Needs Trust (sometimes called a Special Needs Trust) is a specialized legal document designed to benefit an individual who has a disability. A Supplemental Needs Trust is most often a “stand alone” document, but it can form part of a Last Will and Testament. Supplemental Needs Trusts have been in use for many years, and were given an “official” legal status by the United States Congress in 1993.
A Supplemental Needs Trust enables a person under a physical or mental disability, or an individual with a chronic or acquired illness, to have, held in Trust for his or her benefit, an unlimited amount of assets. In a properly-drafted Supplemental Needs Trust, those assets are not considered countable assets for purposes of qualification for certain governmental benefits.
Such benefits may include Supplemental Security Income (SSI), Medicaid, vocational rehabilitation, subsidized housing, and other benefits based upon need. For purposes of a Supplemental Needs Trust, an individual is considered impoverished if his or her personal assets are less than $2,000.00.
A Supplemental Needs Trust provides for supplemental and extra care over and above that which the government provides.
Supplemental Needs Trusts had been used for years based upon case law. In 1993, Congress created an exception under the amendments to the Omnibus Budget and Reconciliation Act (OBRA-93) which specifically authorized the use of Supplemental Needs Trusts for the benefit of individuals who are under the age of 65 years and disabled according to Social Security standards. The Social Security Operations Manual authorizes the use of Supplemental Needs Trusts to hold non-countable assets.
Each Supplemental Needs Trust is its own "entity" with its own Federal Identification Number (Employer Identification Number) issued by the Internal Revenue Service. The Trust is not registered under either the Grantor's or the Beneficiary's Social Security Numbers.
According to Congress a Supplemental Needs Trust must be irrevocable. A properly-drafted Trust will include provisions for Trust termination or dissolution under certain circumstances, and will include explicit directions for amendment when necessary.
WHAT CAN A SUPPLEMENTAL NEEDS TRUST BE USED FOR?
To Ensure That Your Disabled Family Member Has Every Opportunity For A Fulfilled And Happy Life . . .
According to the law, a Supplemental Needs Trust can be used for "supplemental and extra care over and above what the government provides." A properly-drafted Supplemental Needs Trust will work on a "sliding scale"; that is, in the impossible event that the government provides for 100% of the disabled beneficiary's needs the Trust will provide 0%. If there are no governmental benefits available, the Trust can provide 100%. Most people fall somewhere along the scale, and the Trust supplements governmental coverage. If a beneficiary falls into a Medicare "doughnut hole" for example, it becomes the Trust's job to cover the shortfall.
Although there are Medicaid rules that say that the Trust cannot be used for housing or food, these rules have to be interpreted carefully. For example, there is no restriction on purchasing an accessible home or making accessibility adaptations to an existing home and having the Trust own or pay for them. Likewise, although foodstuffs are not strictly allowable under the rules, social events such as dinner parties are; likewise, vacations and entertainments are permitted.
It is important to remember that a Supplemental Needs Trust is a living legal document that is meant to not only maintain benefits eligibility, but also to bring enjoyment and new, positive experiences to the beneficiary.
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