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Special needs trust: How can it be used?

Darlene A. Kemp
Wednesday, Dec 5, 2012

Many people with special needs and disabilities are becoming aware of various legal venues they may be able to use to protect their assets and potentially qualify for or maintain needed government assistance. If a person with a disability finds himself or herself the recipient of an inheritance, personal injury settlement or divorce settlement, the newly acquired financial resources may jeopardize eligibility for relied-upon public benefits. “Special needs trusts” can alleviate the “need” to “give” funds away. A trust can protect financial assets and ensure continued quality of life without risking the loss of government assistance.

The establishment of a special needs trust is usually executed by a special needs attorney or an elder law attorney, depending on the person’s needs. There are guidelines on how the funds in the trust can be spent. One major rule that must be understood is: The trust funds must be used only for the direct benefit of the trust beneficiary.

The trust money can be used for the beneficiary’s “special needs.” For this reason, the term “special needs trust” has been coined to describe this type of trust. Generally speaking, the trust money can be used to purchase nonsupport items that are other than essential medical care, food and shelter.

The following are some suggestions for how special needs trust funds may be used:

• If the trust beneficiary still owns his or her home, the funds can be used for maintenance and upkeep, as well as utilities, taxes and property insurance.

• Non-medical sitter or companion services.

• Medical, dental, diagnostic work and treatments that would not otherwise be paid for by government benefits.

• Differential in cost between a private and semi-private room at a nursing home.

• Expenditures for travel, vacation and transportation, including the purchase of a vehicle and its adaptation for a specific disability.

• Prepaid funeral expenses.

• Electronic equipment, computers and telephone service for the direct benefit of the beneficiary.

Upon the beneficiary’s death, any money remaining in the trust is usually used to reimburse the state for Medicaid benefits. If there is money remaining in the trust after Medicaid has been satisfied, the money is given to individuals the beneficiary has designated at the time the trust was established. At times, the remaining money is retained by the trust and used for the benefit of people living with disabilities.

With a properly designed special needs trust, people living with a disability can have the peace of mind that comes from knowing that assets are safe and their individual needs are met. A trust lessens the burden on the person living with a disability and their family members. It provides professional management of the funds by experienced trustees. In certain situations, a trust gives a person the ability to leave assets to family members. A special needs trust safeguards personal assets and provides for the comforts of life that public benefits do not cover – all without jeopardizing eligibility for government assistance.

Darlene Kemp, MPH, MBA-HCM, is the executive director of Vista Points Inc., a nonprofit organization that is the trustee for the Tennessee Pooled Trust and a national referral center for people needing assistance regarding special needs trusts. For more information, visit www.vistapoints.org or call (615) 758-4660.


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