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The Benefits of a Special Needs Trust

Northwest Elder Law Center March 24, 2023

Stethoscope Over the MoneyIf you have a child with special needs because of a disability and your child requires assistance from public benefits such as Medicaid or Supplement Security Income (SSI), there are income and asset limitations to qualify for those benefits.   

The best way to ensure your loved one will continue to qualify for and receive those benefits no matter what happens to you is to set up a special needs trust (SNT). This will keep your loved one under the income/asset qualification limits to preserve their benefits and supplement their lifestyle. A special needs trust is also essential if your child receives a settlement from an accident or personal injury lawsuit.  

If you have a child who needs the benefits provided by Medicaid and/or SSI in or around Kennewick, Washington, contact the Northwest Elder Law Center to discuss opening a special needs trust.   

Attorney Robert Taylor-Manning has more than 25 years of experience in helping individuals and families preserve their assets while qualifying for needed public benefits. His firm also serves clients throughout Olympia, Tumwater, Lacey, Shelton, Centralia, and Chehalis. 

What Is a Special Needs Trust? What Are the Benefits? 

A special needs trust, or SNT, is a perfectly legal vehicle to provide assistance to a child, or yourself for that matter if a disability requires the aid of public programs such as Medicaid and Supplemental Security Income (SSI). Both of these programs have income/asset qualifications. For instance, an individual cannot have more than $2,000 in assets, but there are exemptions such as a primary home, a car, and other necessities of life.  

Money put into an SNT, which is managed by a trustee, does not qualify as individual income or assets under IRS rules since a third party is in charge of the funds. Thus the SNT can distribute funds to your child to provide for services that Medicaid and SSI cannot, which generally provide only basic medical and housing expenses. The SNT can be used to cover the other needs of life, including:   

  • Caregiving and personal assistance  

  • Housekeeping, cooking  

  • Computers, cell phones, television, appliances  

  • Grooming, dry cleaning, clothing  

  • Transportation costs  

  • Yard services, home security services  

  • Pet care  

  • Accountants’ and attorneys’ expenses 

Types of SNTs 

There are basically two types of special needs trusts, third-party or self-settled, which is a first-party SNT. A third-party SNT can be established and contributed to by anyone, including family members and friends. A third-party SNT can also name a beneficiary should the primary recipient pass away. This means the funds cannot be touched by Medicaid to recover for the benefits provided.  

A self-settled or first-party SNT, on the other hand, is subject to the government upon the death of the recipient. A first-party SNT is generally used to place funds from a settlement, legal award, or inheritance that would otherwise go to the recipient and disqualify that person from government benefits. In a first-party trust, Medicaid is the primary beneficiary. Once Medicaid recovers what it has provided in benefits – if there is anything left – the other beneficiaries have a right to the assets.  

Another type of SNT is called a pooled special needs trust. These are run by non-profit organizations that pool funds from various individuals. Washington State also offers a program called the Developmental Disabilities Endowment Trust Fund.   

The DD Endowment Trust Fund allows individuals with developmental disabilities or their families to set aside funds for future use without affecting their eligibility for government services and benefits, such as Supplemental Security Income (SSI) and Medicaid. 

Compassionate Legal Guidance 

If you have a child who needs the services of Medicaid or Supplemental Security Income, you should definitely consider setting up a special needs trust. If you simply transfer funds to your child through a will or living trust, the cash infusion could jeopardize your child’s qualifications for government assistance.  

If you’re in or around Kennewick, Washington, contact the Northwest Elder Law Center. We will help you establish a special needs trust so your loved one can be cared for far into the future without jeopardizing government assistance programs.