Special Needs Trusts: Protecting Assets and Assuring Quality of Life for Loved Ones with Disabilities

Special Needs Trusts allow parents — or anyone — to direct money, gifts, lawsuit settlements, or other funds to the trust without the beneficiary losing eligibility for certain government programs such as Supplemental Security Income (SSI) and Medicaid. Trusts may be used to supplement those items or services not covered by public funds, and, if sufficiently funded, can also provide spending money for quality-of-life enhancing expenses. Absent the trust, the individual with disabilities may be required to exhaust any inheritance or other assets before becoming eligible for government benefits, or may be required to use these funds to reimburse the government for care and expenses.

Special needs trusts are frequently created by a parent or other family member for a child with special needs, even though the child may be an adult by the time the trust is funded or needed. Such trusts can also be set up in a will as a way to leave assets, including life insurance benefits if the trust is designated as the beneficiary, to a disabled relative.

"Self-settled" trusts are another form of special needs trust that may be established by individuals who become disabled as the result of an accident or medical malpractice and later receive the proceeds of a personal injury award or settlement.

It is very important that the attorney who drafts the Special Needs Trust has specific experience in the area and does not draft the typical trust which families typically use in their estate planning. If not structured properly, the individual's assets may render them ineligible for SSI or Medicaid and could lead to government agencies seeking judgments against parents and guardians for the past costs of publicly financed health care and cash benefits.

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Attorney Robert H. Farley, Jr. has specialized experience planning and developing special needs trusts to protect assets and improve the quality of life of individuals with disabilities.