A Special Needs Trust can be a powerful tool to allow a recipient of public funds to have a better quality of life without jeopardizing their benefits. However, special needs trusts are highly complex and must comply with various requirements to fulfill their objective. Many people turn to a special needs attorney for help creating and administering a special needs trust. If you are considering a special needs trust for you or a loved one, the experienced estate planning attorneys at Harrison Law, PLLC can help. Contact our legal team to set up an appointment today at (480) 320-2310.
What Is a Special Needs Trust?
A special needs trust is specifically designed for beneficiaries with disabilities who are under 65. These legal documents are intended to supplement the recipient’s public benefits. Individuals with disabilities may have disability-related expenses, such as medical care, the need for home renovations, transportation adaptation requirements, and more. These needs may not be covered by their public benefits. By carefully drafting a special needs trust, an individual with a disability can keep their public benefits but have a better quality of life because funds are available to pay for these additional needs.
With a special needs trust, the beneficiary cannot have direct access to the funds or be able to control distributions. There are also restrictions regarding how the funds can be used, such as for:
- Additional medical services not provided for by public benefits, such as physical therapy, dental services, vision services, or rehabilitation
- Durable medical equipment
- Specially equipped vans, wheelchairs, and other assistive devices
- Home improvements or renovations to accommodate the disability
Special needs trust funds should not be used for expenses the public benefits are intended to pay for, such as food or housing. Depending on the type of trust, the special needs trust may need to include a provision that states that any remaining funds in the trust after the beneficiary’s passing must go to the state’s Medicaid agency to reimburse it for the funds it spent on the beneficiary.
Why Would Someone Need a Special Needs Trust?
As the Arizona Health Care Cost Containment System (AHCCCS) explains, special needs trusts sometimes allow people who would otherwise not qualify for Arizona Long Term Care System services due to excess resources or income to become eligible for these services. Public benefits are typically need-based. Having too many resources or too much income can disqualify applicants and even current recipients. For example, claimants who receive Supplemental Security Income (SSI), cannot have assets greater than $2,000 for an individual or $3,000 for a married couple. A special needs trust can be crafted so that the recipient does not exceed these resource levels.
The AHCCCS explains that special needs trusts, or special treatment trusts, must meet certain conditions to qualify under this status. AHCCCS reviews all such trusts to ensure they qualify for special treatment. AHCCCS requires all special needs trusts for the purposes of qualifying for services under this program to meet the following requirements:
- The trust was created after August 10, 1993.
- The claimant is designated as the beneficiary of the trust.
- AHCCCS must be named as the remainder beneficiary upon the claimant’s death.
- The trust must state that the administrator cannot make disbursements from the trust for any purpose other than those described in ARS §36-2934.01.
- The trust must allow disbursements for administrative expenses approved by AHCCCS or the probate court.
- Any income assigned to the trust must be directly deposited into an account titled tot he trust.
- The trust must contain reference to Title 42 of the United States Code; 42 USC §1396p(d) or Section 1917(d)(4) of the Social Security Act.
Types of Special Needs Trusts
There are three different types of special needs trusts:
First Party Special Needs Trust
A first-party special needs trust is created when a Medicaid applicant or beneficiary has resources in their own name that exceed the resource limit for the program. Often, this applies when the applicant has suddenly come into unexpected funds, such as through an inheritance or personal injury claim. The applicant transfers the resources to a trust without penalty. A parent, grandparent, guardian, or court must create the trust before the individual with a disability reaches age 65. The trust must be created for the sole benefit of the person with disabilities.
Third Party Special Needs Trust
A third-party special needs trust is created with someone else’s assets. The trustee must have sole discretion to make disbursements from the trust so that the beneficiary does not own trust property or have direct access to trust funds.
Pooled Trust
A pooled trust is created and managed by a nonprofit organization. It “pools” together the resources of multiple beneficiaries and creates sub trusts for each one. Each beneficiary only benefits from the assets in their individual sub trust. However, the nonprofit organization oversees the entire fund. Applicants can be over age 65 and still use this type of trust. This type of trust can be established by the Medicaid applicant or their parent, grandparent, guardian, or court. After the Medicaid recipient passes away, the state is entitled to reimbursement from the trust for expenses it paid on the beneficiary’s behalf. Any remainder funds are divided between the nonprofit organization and the remaining beneficiaries of the trust.
How Can a Special Needs Attorney Help?
Special needs trusts are complex legal tools. While they can help an individual with disabilities access services and resources that public benefits would not provide, they must be carefully drafted to avoid causing the beneficiary to lose their benefits. A special needs attorney from Harrison Law, PLLC can review your situation and determine whether a special needs trust is right for you. They can also carefully craft the trust to meet your specific needs.
Contact Harrison Law, PLLC for Help with Your Special Needs Trust
If you think a special needs trust may be right for you or your loved one, a special needs attorney from Harrison Law, PLLC can discuss this matter with you during a confidential consultation. You can arrange your consultation by calling (480) 320-2310.
© 2022 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved
This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.
