If you are a parent or caregiver of a child with a disability, one of the biggest concerns you may have is the amount of money that will be needed to support him or her. Will resources be available to provide for that child during your lifetime and beyond? Planning for a person with special needs introduces a new set of considerations and requires a well thought-out strategy.
Once a child with a disability is an adult, government programs are available to provide some benefits to help him or her live more independently. If specific requirements relative to income and asset ownership are met, he or she may be eligible for Social Security income, Medicaid, vocational rehabilitation and subsidized housing.
In order to maintain the adult child’s eligibility for government benefits, special attention must be given to gifting. It is important that all the players involved in the life of a special needs person understand gifting rules so that the child’s eligibility for Social Security and/or Medicaid is not negated.
A special needs trust is a vehicle that may be helpful in providing for the care over and above what the government benefits provide. It enables assets to be available to that person, while allowing that person to receive needs-based benefits from Social Security and Medicaid. There are no limits on the amounts that can be held in the trust; those assets will not be counted toward the eligibility requirements for government benefits.
Should a person with special needs already own assets in his or her own name that exceed the allowable limit, a first-party special needs trust may be established. It is also known as a Payback Trust. A Payback trust can also be established if there has been incorrect titling on assets, such as designating the special needs person as a beneficiary on a life insurance policy. With this kind of trust, the state requires that it be reimbursed for benefits that were paid during the special needs person’s lifetime after that person dies.
We understand that navigating the system to plan for your loved one may be new territory. It requires an understanding of the law and government benefit programs. Fortunately, there are a number of helpful resources. The Social Security Administration is an excellent resource for more information. We also recommend that you discuss your particular situation with an attorney who specializes in special needs. We can refer you to an attorney for more detailed legal advice.
 “Why Use a Supplemental Needs Trust?”