SPECIAL NEEDS TRUSTS

                                                                            by

                                                           Attorney John Cashman

                  For additional information: link to Radosevich, Mozinski, Cashman & Olson LLP

Do you have a disabled child or other relative you want to benefit from your estate, but at the same time are concerned that the gift or inheritance may affect their public benefits, particularly Medical Assistance?  If so, establishing a Special Needs Trust (SNT) may be the best way to provide for your loved one.  The SNT can be designed so it does not reduce benefits the disabled person receives from the government, rather, the SNT 'supplements' those basic necessities.

Most government benefit programs such as Supplemental Security Income (SSI), Medical Assistance (MA), or Title XIX programs, as well as other special medical programs, have strict income and asset limits.  If a trust set up for a disabled person could be used for basic necessities such as housing, food, clothing and medical care, the trust will be viewed as an asset.  If the trust causes the disabled person's assets to be higher than the limit, they may be ineligible for government benefits. Most programs have asset limits as low as $2,000.

Money placed in a Special Needs Trust for a disabled person is protected because the rules for the trust dictate trust money may not be used to replace government benefits, rather, it can only be used for 'extras' not covered by government programs.  'Extras' may include occasional vacations, camps, and replacement of certain items such as televisions and stereos.  The trust may also allow for payment of medical or dental procedures that Medical Assistance does not cover, or the extra cost of a private or larger room in a group home, which might be outside the government payment plan.

A Special Needs Trust can also be used by a disabled individual to shelter  his or her own money.  This might be prudent if the person receives a personal injury or divorce settlement.  This type of SNT is known as a 'self-funded trust' because it uses money coming from the disabled individual.  By law, these trusts must have a pay back provision: upon the death of the disabled person, any remaining trust funds are used to pay back Medical Assistance.  'Third party' funded SNT's, such as those set up by a parent for a child using the parent's money, do not require a payback.

If a disabled person is receiving a substantial personal injury settlement or large inheritance, it often makes sense to have a trust company manage the trust.  However, in the past, due to administrative costs, smaller Special Needs Trusts have often been uneconomical to set up and maintain.   Wisconsin has now established a Pooled Trust Program.  This program, known as Wis Pact, makes smaller SNT's far more practical.  Sub-accounts are established for each disabled beneficiary, but the money in all the sub-accounts is pooled and invested by one corporate trustee.

A Special Needs Trust provides a way to enhance the life of a disabled person with extras, while still protecting his or her eligibility for government programs providing the basic necessities of life.  If the situation is appropriate, a SNT can purchase supplemental items, thus providing a higher quality and more enjoyable life for someone with a serious disability.

                  For additional information: link to Radosevich, Mozinski, Cashman & Olson LLP