Why Use a Special Needs Trust

To Preserve Governmental Benefits And Protect Assets…

A Supplemental Needs Trust (sometimes called a Special Needs Trust) is a specialized legal document designed to benefit an individual who has a disability. A Supplemental Needs Trust is most often a “stand alone” document, but it can form part of a Last Will and Testament. Supplemental Needs Trusts have been in use for many years, and were given an “official” legal status by the United States Congress in 1993.

A Supplemental Needs Trust enables a person under a physical or mental disability, or an individual with a chronic or acquired illness, to have, held in Trust for his or her benefit, an unlimited amount of assets.  In a properly-drafted Supplemental Needs Trust, those assets are not considered countable assets for purposes of qualification for certain governmental benefits.

 Such benefits may include Supplemental Security Income (SSI), Medicaid, vocational rehabilitation, subsidized housing, and other benefits based upon need. For purposes of a Supplemental Needs Trust, an individual is considered impoverished if his or her personal assets are less than $2,000.00.

A Supplemental Needs Trust provides for supplemental and extra care over and above that which the government provides.

Supplemental Needs Trusts had been used for years based upon case law. In 1993, Congress created an exception under the amendments to the Omnibus Budget and Reconciliation Act (OBRA-93) which specifically authorized the use of Supplemental Needs Trusts for the benefit of individuals who are under the age of 65 years and disabled according to Social Security standards. The Social Security Operations Manual authorizes the use of Supplemental Needs Trusts to hold non-countable assets.

Each Supplemental Needs Trust is its own “entity” with its own Federal Identification Number (Employer Identification Number) issued by the Internal Revenue Service. The Trust is not registered under either the Grantor’s or the Beneficiary’s Social Security Numbers.

According to Congress a Supplemental Needs Trust must be irrevocable. A properly-drafted Trust will include provisions for Trust termination or dissolution under certain circumstances, and will include explicit directions for amendment when necessary.


To Ensure That Your Disabled Family Member Has Every Opportunity For A Fulfilled And Happy Life . . .

According to the law, a Supplemental Needs Trust can be used for “supplemental and extra care over and above what the government provides.” A properly-drafted Supplemental Needs Trust will work on a “sliding scale”; that is, in the impossible event that the government provides for 100% of the disabled beneficiary’s needs the Trust will provide 0%. If there are no governmental benefits available, the Trust can provide 100%. Most people fall somewhere along the scale, and the Trust supplements governmental coverage. If a beneficiary falls into a Medicare “doughnut hole” for example, it becomes the Trust’s job to cover the shortfall.

Although there are Medicaid rules that say that the Trust cannot be used for housing or food, these rules have to be interpreted carefully. For example, there is no restriction on purchasing an accessible home or making accessibility adaptations to an existing home and having the Trust own or pay for them.  Likewise, although foodstuffs are not strictly allowable under the rules, social events such as dinner parties  are; likewise, vacations and entertainments are permitted.

It is important to remember that a Supplemental Needs Trust is a living legal document that is meant to not only maintain benefits eligibility, but also to bring enjoyment and new, positive experiences to the beneficiary.  


Supplemental  Needs Trusts Need Special Language…

At a bare minimum, the Trust should state that it is intended to provide “supplemental and extra care” over and above that which the government provides.

The Trust must state that it is not intended to be a basic support Trust. It should not contain an estate tax provision called a “Crummey Clause.”

A properly drafted Supplemental Needs Trust should reference the Social Security Operations Manual and the relevant portions from within the Manual that authorize the creation of the Trust. It must contain the required language regarding payback to Medicaid.

The Trust should also have language explaining the exception to the Omnibus Budget and Reconciliation Act (OBRA-93) provisions which authorize the creation of the Trust, and a copy of the relevant provisions from the United States Code (USC).