If you have a disabled person in your family or under your care, you may be concerned about helping them to maximize their resources and enhance their quality of life. A supplemental needs trust might be just the ticket.
What is a supplemental needs trust? A supplemental needs trust is a legal tool used to help disabled people keep assets without losing their public benefits, such as Medicaid and Supplemental Security Income. The purpose of the supplemental needs trust is to enhance the quality of life for the disabled person, by permitting the trust to pay for expenses not paid for by public benefits. In that way, the trust supplements the beneficiary’s benefits, rather than replace them.
Who needs one? Often times, a person has become disabled because of an accident, and they receive a large settlement from a lawsuit. Other times, a disabled person is the beneficiary of an inheritance from a loved one. In either case, receiving a sum of money can jeopardize the person’s Medicaid benefits and Supplemental Security Income. A supplemental needs trust can step in to allow the person to benefit from the money during their lifetime, yet still remain eligible for government services.
How do I set one up? If you’re under age 65, you can create a first-party supplemental needs trust created and funded with your own money. This is known as a “pay back” trust, meaning that after the disabled person dies, the remaining assets in the trust are used to reimburse Medicaid. If the disabled person is receiving money through an inheritance or a gift, the person providing the money can set up a third-party supplemental needs trust to receive the funds and secure them from New York Medicaid eligibility requirements and Social Security regulations. There is no “pay back” provision with a third-party supplemental needs trust, and it has the added advantage of allowing parents or other individuals to plan and set it up while they are still alive.