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There’s a Lot to Know About Special Needs Trusts. Start Here.
Milestone Consulting, LLC
(716) 883-1833

If you or your family member is about to receive a personal injury settlement, that influx of money could mean disqualification from SSI, Medicaid, and other government benefits programs. A special needs trust is one way to have your settlement and your benefits, too.

What is a Special Needs Trust?

People receiving SSI and/or Medicaid typically cannot have more than $2,000 to their name without losing eligibility for their benefits. A special needs trust supplements — without replacing — a disabled person’s government benefits by paying for “non-countable” services, expenses, or equipment. These items include (but are not limited to):

  • A home
  • Home furnishings and personal belongings
  • A vehicle
  • Occupational goals, such as the pursuit of a college degree or vocational training
  • Essentials for self-support
  • Life insurance policies
  • Burial expenses

By using the funds from the trust to pay for these non-countable items, an individual can still comply with needs-based government programs.

Types of Special Needs Trusts

There are two common types of special needs trusts:

  • A first-person trust requires assets come from the disabled person, for example, in instances of an injury settlement or inheritance. The remainder of a first-person trust typically reimburses the government for what it has paid, meaning you remain on SSI and Medicaid for example, and get the benefit of the assets placed into the trust, but upon death, the state is paid back first out of the trust assets before they go to a beneficiary.
  • A third-party trust is created by an individual’s family members to ensure he or she receives the present and future care they would want and expect. Parents who set up a third-party trust have more control over the balance than they would with a first-person trust. Like with other types of trusts, the remainder could be allocated elsewhere at their discretion.

With both kinds of trusts, the money does not and cannot be given directly to the disabled person. To protect against disqualification from government needs-based benefits, the trust instead pays for “non-countable” needs directly.

Establishing and Administering a Special Needs Trust

The only reason to create a special needs trust is to preserve benefits.  Families should first speak with an expert to decide whether this planning tool is the best option. If it is, the biggest decisions families should focus on are:

  1. Selecting the right trust
  2. Choosing the right trustee
  3. Working with a settlement planner with experience
  4. If necessary, hiring the right lawyer for the drafting of the trust

Decisions associated with setting up a trust raise many questions and concerns. Seasoned planning experts are very careful to follow the language of the statute when setting up a special needs trust. Choosing the right terms is critical. As a general rule, the three main concerns for a trust once it’s set up properly are:

  1. Management of the monies
  2. Accounting
  3. Ongoing costs of administration

Many families we work with brace against the idea of someone else, especially a bank or trustee, to be in charge of the assets in settlement. An individual needing to preserve medicaid should insist on having a trust protector as part of the trust agreement. This is the only way to guarantee that the family retains the client-trustee relationship and insures the best interests of the beneficiary is paramount.

Getting Professional Assistance Makes a World of Difference

By working with an experienced settlement planner, all steps can be managed professionally. The family making decisions should know exactly how much they are being charged for each person or company involved in the administration.  The best framework for most families is to have an independent professional trustee and a professional wealth manager administer the trust, instead of a big bank that lumps the functions all together.  Typically, the larger the institution, the more expensive and less friendly.  The support network for a special needs trust should feel like an extension of the family, and with the professionalism of a law firm or accounting firm.

At Milestone Consulting, our experts assist families in determining which type of trust is best suited to their needs. We ensure all the necessary legal work and required documentation are prepared in a timely manner. Our trusts carry an all-in fee of 1.25% on the assets placed into trust. If you’re considering the benefits of a trust, we welcome you to contact Milestone for assistance.

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