Full question:
I have a friend who is 53 years old,is mentally challenged, brain damaged from birth, and had been on SSI for several decades. His mother died about 3 years ago and had pending Worker Compenstation clains. Recently, my friend is getting $2000 to $3000 from 1 lawsuit. There are 4 more lawsuits which could represent $20,000 to $30,000 his share. He has had 3 other siblings that will receive equal sums. Can he file a 'Special Needs Trust' and deposit money from the lawsuits and be protected from being denied Medicare and SSI monthly payments? Once the Special Needs Trust has been completed, what is the next step? Are they to be filed with a County Judge,or State Judge or Social Security Dept? Pleas advise
- Category: Trusts
- Date:
- State: Alabama
Answer:
There are very strict requirements that must be followed in drafting and administering Special Needs Trusts in order to have the intended effect of qualifying the beneficiary for need-based benefits. Depending on the source of the trust funds, some special needs trusts must be court-approved and age restrictions may apply. Filing requirements depend on the type of trust involved. For example, if the person with disabilities is receiving SSI, a Self-Settled Special Needs Trust should be filed with the Social Security Administration. Special Needs Trusts are complex because they involve state and federal government benefit laws and regulations as well as trust laws. I suggest you contact a local attorney who can review all the facts and documents involved.
If the trust is intended to supplement, rather than replace, government benefits, it must be properly drafted. Although requirements vary according to state law and the type of trust being established, some general rules include:
• Generally, only a parent, grandparent, legal guardian, or court can set up a special needs trust. The disabled person, no matter how competent, cannot be the "creator" of the trust (even if the trust is funded by his or her personal assets).
• Funds may not be available to the disabled beneficiary.
• The beneficiary cannot revoke the trust.
• The individual with special needs must be considered "permanently and totally disabled" under SSI criteria. Different rules apply to adults and children.
• Under the terms of the trust, the trustee may not be allowed to make payments or distributions that might interfere with government benefit eligibility (e.g., distributions cannot be made directly to the beneficiary).
• Special needs trusts may be created as part of a will or during the creator's lifetime.
• Special needs trusts have no limit on the amount of funds included and can be added to at any time.
Please see the information at the following links for further discussion:
https://www.financialpro.org/foundation/Docs/Special_Needs_Trust.pdf
http://www.thefreelibrary.com/Special+needs+trust%3a+which+kind+is+right+for+you%3f-a0164105455
http://www.wrightslaw.com/info/future.plan.index.htm
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
