In the estate planning world, special needs planning is one of the more complicated areas. It is important to understand the similarities and differences between special needs trusts and supplemental needs trusts. This ensures the proper care of your loved one with disabilities.
The Goal of Special Needs Trusts
The goal of both trusts is to provide funds to pay for certain goods and services that are not covered by government-sponsored programs (including Medicaid and Social Security Income). It is also important to protect the person’s eligibility for these programs.
Similarities Between Trusts
To begin, it is helpful to look at how special needs trusts and supplemental needs trusts are similar. As stated before, they both aim to aid in the care of a person with disabilities. They both allow the trustee to approve the distribution of funds to pay for needs. These needs include personal care aides, vacations, recreation, furnishings for their home, electronics, vehicles, advanced medical and dental care, education, physical rehab, and more. It is imperative to work with an estate planning attorney to draft either special needs trusts to ensure it is properly written, implemented, and funded. Doing so will safeguard the funds and be sure the money will be available to pay for these goods and services to enrich the life of the disabled person. This is done without risking eligibility for Medicaid and SSI.
Differences Between Trusts
Next, it is important to understand the basic difference between the two types of trusts. The main difference between trusts is how they were funded. In other words, who owned the assets to create the trust? In a special needs trust, the money came from a person with disabilities. The money can be from an inheritance or personal injury settlement. A supplemental needs trust is typically funded from a family member’s assets.
The difference between these two trusts is important because of the consequences it will have on any remaining monies in the trust after the primary beneficiary dies.
Medicaid must be reimbursed when benefits are paid through a special needs trust. Special needs trusts can only have one beneficiary as well. Another important difference is throughout the life of the special needs trust, the government also requires approval to authorize a payment above $5,000 to any one entity in a single calendar year. A supplemental needs trust operates differently. The remaining funds can be passed to other beneficiaries, including siblings.
Creating a Trust
Special and supplemental needs trusts are complex. An estate planning attorney is an expert at designing special needs trusts. If not well-drafted, your trust can jeopardize the primary beneficiary’s eligibility for necessary government assistance.
Lastly, we would like to reemphasize the importance of beneficiary designations. In the past, we have covered common mistakes people make when designating a beneficiary. We encourage you to read through them again. It is easy to make and update beneficiary designations. Be sure to keep yours up to date when any life changes happen.
Contact a Savannah Special Needs Attorney
Have questions about the differences between special needs trusts and supplemental needs trusts? Contact us today.