Funding a Special Needs Trust

Our recent blogs have discussed when to create a Special Needs Trust (SNT) including the various types of SNTs to consider. This week we will explain the critical importance of properly funding a Special Needs Trust.

What does it mean to “fund” a trust?

To put it simply, funding a trust means transferring assets into the name of the trust. When it comes to an SNT, the assets that are transferred (or put into) to the trust are not countable for public benefit programs like SSI and Medicaid, which have strict asset and income limitations. As we have mentioned, maintaining public benefit qualifications is one of the primary reasons for creating the trust.

Where do the assets to “fund” a special needs trust come from?

A disabled person may receive money or other assets from a variety of places. For instance, a disabled person could get money from a lawsuit, an inheritance, a life insurance policy, or even assets controlled by a guardianship or conservatorship. A disabled person may also receive gifts, donations from fundraisers like Go Fund Me, gifts from Wills and Trusts, or even money from retirement accounts. If you have a disabled loved one, it is important to contact an experienced elder law attorney to help you make special accommodations for them in your own estate plan.

Let’s meet Peg. She is a 61-year-old lady who suffered a severe brain injury years ago and was determined disabled through the Social Security Administration. Peg receives monthly income from Social Security Disability Income (SSDI). After a string of other health issues and yet another hospitalization, Peg landed in a nursing home and will need to stay for long-term care. The nursing home applied for Medicaid on Peg’s behalf and she was approved. Sadly, Peg’s mother died recently, without a proper Will in place, leaving a large portion of her assets to Peg. While the inheritance has no negative impact on Peg’s SSDI, Medicaid only allows Peg to have $2,000 in countable assets. The inheritance can cause big problems for Peg.

What can Peg do to keep her Medicaid and preserve additional money for her supplemental needs for the rest of her life?  

Because Peg is disabled and under the age of 65, she can create a SNT and transfer excess assets to the trust. Medicaid will not be affected, and the assets in the trust can be used for anything Peg might need that Medicaid doesn’t cover, like clothing, snacks, a cell phone, laptop, private rehabilitation services, you name it! As you can see, using a SNT turned a problem for Peg into a great benefit just as Peg’s mother would want for her.

We are winding down our blogs discussing the “ins and outs” of special needs trusts. Hurley Elder Care Law specializes in this type of planning and would like to help you.  If you think a special needs trust may be right for your loved one, please contact our office for a complimentary telephone consultation today at (404) 843-0121. Also, please join us for a FREE webinar, “Special Needs: Unique Challenges, Creative Solutions” tomorrow (Wed. April 28) from 12-1 PM presented by Jennifer Ghorley, JD. Register here.


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