It is essential that Special Needs Trusts obey specific technical requirements, however, this does not mean that they must be inconvenient or restrictive.
It is a false assumption that Special Needs Trusts are only used for medical situations that are related to a disability. Special Needs are broadly defined, virtually, all Special Needs Trusts define special needs as anything that is not provided by the Trust beneficiary’s public benefit programs.
Public benefit programs do not provide supplemental items that improve quality of life because they are intended to only provide for basic needs and critical items. Special Needs Trusts are valuable because they can pay for supplemental items that improve the Trust beneficiary’s quality of life such as a vehicle or a home. Special Needs Trusts are also helpful for paying for vehicle and household maintenance along with necessary items such as computers, electronic equipment, academic expenses and monthly bills such as cable, phone, and internet costs. They are also helpful when paying for medical care that is not supported by Medicaid such as additional therapy and the differential between having a private or a shared room. Of course, the Trust must be funded with enough assets to make these purchases.
Special Needs Trusts are great tools; however, you are probably wondering how you would comply with the technical requirements. First, they must always comply with the rules of the Trust beneficiary’s public benefit program. In many cases, this means that cash is not allowed to be paid to the Trust beneficiary because cash will count as income under the eligibility requirements for most public benefit programs. This is also true when the same cash does not count as income for tax purposes.
However, this challenge can easily be overcome by paying service providers and vendors directly. For example, giving money to a Trust beneficiary for bill payment will result in countable income for purposes of public benefit eligibility but bill payment directly from the Trust will not result in countable income. This means, a Special Needs Trust can comply with this specific technical requirement by providing the Trust beneficiary with the convenience of a bill payment services.
Special Needs Trusts must also comply with the sole benefit rule. This is an easy rule to comprehend although it first helps to understand a more general rule that applies to Medicaid and SSI. The rule is: people cannot give away their assets if they want to become and remain eligible for most Medicaid programs or SSI.
Those that give away their assets without receiving fair market value are making an uncompensated transfer. A person that makes an uncompensated transfer will be subject to a penalty period. A penalty period does not result in civil fines or criminal penalty, but there will be a period of time during the penalty that the person will be denied Medicaid and SSI. Penalty length will depend on the amount that was transferred without compensation.
Putting the focus back on Special Needs Trusts, this general rule about uncompensated transfers is expressed as the sole benefit rule when applied to Trusts. You cannot make an uncompensated transfer before your Special Needs Trust is established and the sole benefit rule solidifies that fact. The sole benefit rule requires that two things occur. First, Trust disbursements must result in the purchase of a good or service, second, the Trust beneficiary has to receive the direct benefit of the purchase.
Being that the sole benefit rule is a technical requirement, it works for the good of the Trust beneficiary because it makes sure that the beneficiary will receive the entire benefit of their Special Needs Trust.
Global Litigation Consultants has substantial experience administering Special Needs trusts. We ensure that the Trusts comply with all technical requirements in the simplest way possible for Trust beneficiaries. Global Litigation also has substantial disbursement experience with a variety of purchases. In addition to efficiently managing reoccurring expenses, Global Litigation has two special teams for vehicle and home purchases. We ensure that a Trust beneficiary’s public benefits are protected as well as utilizing its specialized teams to oversee and negotiate purchases that are deemed significant upon a Trust beneficiary’s request.
Call us today if you are interested in establishing a Special Needs Trust with the knowledgeable services of a Trustee or if you already have a Special Needs Trust but are having difficulties with a non-responsive or restrictive Trustee.
About Post Author
