Special Beeds Trusts

Beneficiaries who are currently receiving disability income could have a disruption if they receive an inheritance. If a person exceeds a income, cash or asset value level it can affect a person's qualification for benefits.

Special needs trusts prevent disruptions in disability income by withholding an inheritance except when needed.

Cash distributions could result in a dollar-for-dollar reduction in SSI income. Gifts that can be sold for cash may also be considered income, which can reduce benefits.

If the beneficiary does not receive the inheritance directly, it is possible to avoid a disruption in disability benefits. By keeping the inheritance in a trust, one can avoid this problem.

By creating a special needs trust, the successor trustee can make certain purchases of services and some goods (such as movie tickets) that do not result in a reduction of benefits. Due to the complexity of the types of purchases that do and do not affect qualification for disability benefits, be sure your successor trustees understand the laws and have resources in place with contact information to consult.

When the beneficiary of the special needs trust passes, any remaining inheritance is passed along to other beneficiaries.

The special needs trust described above is called a third-party special needs trust, since a third-party is acting as the successor trustee.

A self-settled special needs trust is created by the person already receiving disability income. Self-settled special needs trusts are typically created when the person receives a large sum of money from an inheritance or a large settlement but wants to receive disability benefits. The money in the self-settled special needs trust is mostly off-limits to the person receiving benefits and after the person passes, government services and other programs are repaid using the money in the trust.

Consult an attorney for more information and legal advice on special needs trusts.