Many of my clients want to help a family member that has special needs. Many times, the “help” is to make sure they do not hinder their public benefits by not leaving that family member anything (which is really no help) or leaving it to another family member “for the benefit of” the the one with the disability. Either of these either don’t help or are full of potential problems.
The real solution: a 3rd Party Special Needs Trust
The safest way to leave money or property for a person with disabilities and is on, or likely to be on, public benefits is with a Special Needs Trust (SNT). This trust holds the property for the benefit of the Special Needs person while still preserving benefits for that person. This trust will not replace Medicaid but will help improve the life of the person beyond what Medicaid can do. It’s a truly great gift you can give to a family member that may not be able to work and save for the special things in life.
What is a 1st Party Special Needs Trust
A 1st Party Special Needs Trust is used when the special needs person themselves receives money that would then make them disqualified for public benefits. This is not the preferred trust to use but is the only trust that can be used when money comes directly to the person. We see this many times when a disabled child is named as the beneficiary of an estate. We also see it when a disabled person receives settlement funds from a lawsuit where there were damages. The huge downside to this trust is that any money left in the trust at the death of the disabled person has to go to the State to reimburse for any Medicaid expense paid on their behalf. There is no payback with a 3rd Party SNT, which is why it’s important to set this up in the estate plan rather than deal with it when proper planning is not done.