A common need for many individuals is providing for family members that are disabled and rely on government benefits.  Inheritance that is given to an individual that is reliant on government benefits, through a traditional trust plan, can in some cases disqualify them from their government benefits.  In other words, our good intentions can cause more harm than good.  One way to combat this situation is by creating a Supplemental Needs Trust, sometimes referred to as a Special Needs Trust.  A Supplemental Needs Trust can be vital for anyone with a family member with a disability.  Particularly if that individual relies on government benefits, such as Medicaid for long-term care.

A trustmaker can establish a Supplemental Needs Trust as part of their overall trust plan.  It is a separate trust provision within the main trust that is triggered when the trustmaker has a disabled beneficiary that relies on government benefits for their support and maintenance.  That beneficiary’s share can be assigned to a Supplemental Needs Trust, effectively moving the ownership of that income out of the name of the beneficiary.  This keeps that income from being counted as additional assets owned by the disabled beneficiary, which may or may not disqualify them from receiving government provided benefits that are income based.  A trustee is then appointed to oversee the Supplemental Needs Trust and ensure that the trust’s provisions are adhered to. The trustee also ensures that prohibited items are not purchased with trust funds and “special needs” are paid directly to the entity or individual providing those “special needs.”  In short, the Supplemental Needs Trust retains that person’s inheritance on their behalf, avoiding disqualification from their government benefits.  It is a way of ensuring that you leave them a legacy rather than causing them a mess.

For additional reading:

A Supplemental Needs Trust as Part of Your Estate Plan

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