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Self-Settled Special Needs Trusts

Finding out you or a loved one has a disabling condition is an emotional experience. Whether the disability presents itself at birth or is a result of an illness or accident, many questions regarding the condition itself and how to manage the disability arise. First and foremost are the medical concerns regarding the disability, which may continue to drive all other decisions. In other situations, the medical concerns take a back seat to concerns regarding the individual’s independence.
 
No matter the degree or circumstances of the disability, the financial issues for the life of the disabled individual are of foremost concern. There are many federal and state government benefits and programs available for financial assistance. These benefits provide the disabled individual with educational benefits and medical care and support, and they can often help such an individual maintain his or her independence. Many of these programs and benefits have strict financial eligibility requirements. Often, there are no privately-funded benefits or programs to replace these government assistance programs.
 
In those situations where a disabled individual has assets above the resource eligibility limits for available government benefits, it is often necessary to protect those assets in order to qualify for public assistance programs. A Self-Settled Special Needs Trust can be set up to hold the assets of a disabled individual. Such a trust is created for the benefit of the disabled person, who then becomes the sole beneficiary of the trust. Trust assets are used to supplement available government benefits and provide a safety net for the disabled individual.
 
The following situations may necessitate the creation of a Self-Settled Special Needs Trust:
  • A disabled child has a bank account or some other assets upon attaining the age of 18;
  • The onset of a disabling condition occurs before the age of 65 but after that person has acquired assets during his or her life;
  • A disabled individual becomes the beneficiary of an inheritance or the recipient of a settlement or judgment while receiving government benefits,
  • A healthy individual is involved in an accident or suffers an illness that renders him or her disabled. 
The assets in a Self-Settled Special Needs Trust are managed by a designated Trustee for the sole benefit of the disabled individual. There are very specific rules and regulations that the Trustee of Self-Settled Special Needs Trust must follow to ensure that the assets inside the trust are not deemed an available resource to the beneficiary. All non-professional Trustees should seek guidance regarding the administration of such a trust. Further, these rules and regulations are constantly changing and a Trustee must keep up to date to avoid unintentionally making the trust assets an available resource and thus disqualifying the beneficiary from receiving needed public benefits.
 
Unlike a Third Party Supplemental Needs Trust, at the time of the disabled individual’s death, assets remaining in the trust are first used to repay the state from which the individual received benefits. If additional funds remain after this reimbursement, the funds can be left to designated family members, individuals or charitable organizations.
 
Contact one of the Special Needs attorneys at Huck Bouma to discuss Self-Settled Special Needs Trusts and to determine if this planning opportunity can assist you or a loved one to qualify for or to maintain eligibility for public benefits. If you are the Trustee of a Self-Settled Special Need Trust and would like guidance on proper trust administration, schedule a consultation or trust review today.
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