Special Needs Trust, Part 1

Friday, November 14, 2014, Blog Post SNT

The team at Midwest Elder Law Firm would like to welcome you to our blog. We hope that our blog will provide you with some general insights into the areas of Elder Law and Special Needs Law. This blog does not offer legal advice. If you need legal advice, consult with a lawyer instead of a blog.

October was National Special Needs Law Month. So we’d like to take a belated part in its celebration by creating a series posts about Special Needs Trusts.  Please note that we only skim the surface of this topic with the hope of educating our blog’s audience on a few nuisances of the law.

Special Needs Trust Part 1:

Introduction to Special Needs Law

First, we should probably start by answering the question, “What is Special Needs Law?” Special Needs Law is a focused area of the law that involves representing, counseling, and assisting people with disabilities and their families in connection with a variety of legal issues. Most often Special Needs Law attorneys address the client’s perspective from a holistic viewpoint by discussing legal, medical, financial, social, and family issues.

Most individuals who need the counsel of a Special Needs Law attorney are or will be receiving benefits from Medicaid (in Missouri Medicaid is known as MO HealthNet) or Supplemental Security Income (SSI). Medicaid is a needs-based government program that provides health coverage to over 8.8 million non-elderly individuals with disabilities, including those who are working or who want to work. Many individuals who qualify for Medicaid based on disability also receive cash assistance under the SSI program.

Services provided by Medicaid include, but are not limited to:

  1. Inpatient hospital care
  2. Outpatient hospital services
  3. Dental services
  4. Durable medical equipment
  5. Home health care services
  6. Community psychiatric rehabilitation services

SSI and Medicaid limit the amount of assets an individual can have; and if the applicant has more assets than permitted, he or she doesn’t qualify for benefits. When applicants transfer or gift assets to other individuals or organizations, those transfers may subject the applicant to a transfer penalty. A transfer penalty means that the applicant may be otherwise eligible to receive benefits, but must go through a waiting period based on the value of the assets transferred prior to receiving benefits.

Assets transferred into a properly drafted special needs trust are not subject to transfer penalties, and if the special needs trust is correctly drafted, the assets in the trust are not counted toward the total allowable assets.

Thus a special needs trust is an excellent legal tool trust designed for beneficiaries who are disabled, either physically or mentally. The trust allows the beneficiary to enjoy the use of the trust property, while at the same time allowing the beneficiary to receive essential needs-based government benefits.

Example:

Franklin is a single, 52-year-old man and needs home care because he had a stroke and cannot bathe, clean and cook for himself. He is a Missouri resident and qualifies for MO HealthNet (i.e., Medicaid). The home and community based services which could assist him has a maximum asset requirement of $1,000. Prior to the stroke, he was a financial adviser, and he accumulated $250,000 in assets. If he paid privately for 6 hours per day of home care, the cost would be between $30,000 – $35,000 per year, more than his monthly income. Franklin can transfer his assets to a first-party special needs trust and qualify for the Medicaid benefits he needs, and his Trustee can pay for supplemental needs.

There are many rules that govern the creation and use of special needs trusts. We hope you come back for next week’s “Special Needs Trust Part 2: Types of Special Needs Trusts.”

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