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Preserving means-tested benefits with a special needs trust

On Behalf of | Feb 15, 2021 | Trusts

If you have an adult child who has a disability, you may want to use your estate plan to make life easier for him or her after your death. If you gift cash or other assets to your child, you may inadvertently harm his or her eligibility for Supplemental Security Income, Medicaid or other means-tested public benefits, however. 

Consequently, you may want to place assets into a special needs trust. Your child may then access disbursements from the trust to pay supplemental expenses while remaining eligible for financial assistance from the government. 

Disbursements from the trust

To remain eligible for many types of means-tested public benefits, your child may not use disbursements from the special needs trust on the same expenses that government programs traditionally cover. 

Generally, this means your son or daughter should not use the special needs trust to pay for food, shelter or basic medical care. Other types of disbursements are usually fine, though. 

For example, your son or daughter can probably use funds from the trust to pay for travel, hobbies, home improvements, vocational training and other supplemental expenses that may improve his or her quality of life. 

Your special needs trustee

You may worry about your child accidentally using disbursements to pay for impermissible expenses, potentially causing him or her to lose public benefits. The special needs trustee may put your mind at ease. 

When you establish the special needs trust, you name a trustee to administer it. Among other essential tasks, such as record-keeping and investing, the trustee must approve all disbursements. 

Ultimately, if you select a trustee who understands public benefits, the trustee is not likely to jeopardize your child’s eligibility for financial help. 

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