2.
What
government programs pay for the care of those with special needs?
Social
Security Disability (SSD)
-Based on how many
quarters a person worked and contributed to Social Security.
-The amount an
individual receives is directly related to what the individual earned.
-There are no asset or
income limitations for this program.
-Must be disabled,
according to the Social Security Administration definition.
Supplemental
Security Income (SSI)
-Provides
income for food, clothing, and shelter
-Based on financial need.
-SSI benefit amount reduced by receipt of earned and unearned
income.
-Must be disabled, according to the Social Security
Administration definition.
Medical
Assistance (MA)
-Provides medical care,
food stamps, rent, and heating assistance.
-Based on financial
need.
-Usually received in conjunction with SSI
benefits.
3.
What
if a person who is receiving benefits receives extras, like money or
gifts?
The MA and SSI programs
are programs that an individual must qualify for financially. Money or
other gifts that are given to a person receiving benefits could either
reduce the amount of benefits he or she receives, or make them ineligible
for benefits.
4.
So,
then how can I give someone enough to make their life comfortable?
By using what is called
a Special Needs Trust. This is
a special kind of account, that holds assets for someone who either
can't have many assets in their name, or who can't manage assets
because of a physical or mental challenge.
Those individuals who,
for example, receive personal injury settlements, would fund a trust while
they are alive, and use the money during their lifetime.
This type of trust is funded with the individual's money, so
anything left would go back to the state, to cover the cost of the
benefits they received during their lifetime.
Those individuals, for
example, who wish to leave their children money in a Will, would fund the
trust after they have passed away. This
is not considered the child's money, so if the child didn't use all
the money in his or her lifetime, there is another beneficiary listed to
receive the assets.
5.
How
do these Special Needs Trusts work?
The Trust owns the
money that is put into it, but there are guidelines about how the money is
to be used, written into the Trust. There
is a person who the money is to be used for, who is called the
beneficiary, and there is a Trustee, who manages the money, according to
the Trust guidelines. The
trustee does not own the money. Because
the Trustee has discretion of how the money is to be used, according to
the trust document, and the beneficiary can not take money out directly,
the assets are protected while they're in the trust.
6.
Aren't
there penalties for putting money into a Special Needs Trust?
No.
An SSI/MA recipient, who receives assets that are put into a
Special Needs Trust does not actually ever directly receive the assets.
The assets go directly into the Trust, and belong to the Trust.
The SSI/MA recipient is considered the beneficiary, and has no
control over the assets, even though they are there for his or her
benefit.
There can be penalties,
however, for taking money out of the Trust.
If the money were given directly to the beneficiary, in the form of
cash, then the benefits would be reduced dollar for dollar.
If the Trust gives the beneficiary food, shelter or clothing, then
the benefit rate will be reduced by approximately one-third.
If, however, the Trust gives the beneficiary something that is
other than food, clothing, or shelter, then there is no reduction in the
benefit rate. It is very
important to have a trustee who understands the SSI/MA rules.
7.
Who
would be a good trustee for me?
-Someone that you
trust.
-Someone who
understands the needs of the disabled individual.
-Someone who knows the
SSI/MA rules.
-Sometimes this can be
a family member, or a bank, or a financial planner.
-You choose the trustee
or trustees who you think will best manage the assets for you.
8.
How
do I know what kind of Trust is right for my family?
You should
see an attorney who specializes in planning for families with special
needs.
9.
What happens if I don't set
up a Special Needs Trust for my loved one?
Either you
would literally have to disinherit the disabled person, so that the
inheritance did not make him or her ineligible for benefits. -or-
The
disabled person would receive the inheritance directly and lose his or her
government benefits, possibly for a long time.
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© 2000-2005
Marshall & Associates www.paelderlaw.com
