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Special Needs Trusts have two primary objectives: Fiduciary management and government benefit eligibility.
Special Needs Trusts provide fiduciary management and oversight for individuals who are unable to take direct custody of property, typically because of a cognitive limitation, lack of judgment, or susceptibility to financial manipulation.
In this way, Special Needs Trusts are like other types of discretionary trusts, such as a trust established for a minor or a trust created for a spendthrift who lacks financial discipline. All these trust arrangements serve to protect trust property through the appointment of someone who will exercise independent judgment in determining how trust property will be used for the beneficiary’s benefit.
Regarding government benefit eligibility, preserving eligibility for Medicaid allows the beneficiary to access residential services, home health and personal care services, transportation, and other benefits. And for those who have no other source of income and whose disability leaves them unable to work, the Supplemental Security Income (SSI) program will continue to serve as a primary source of income. Both programs have stringent income and resource limitations.
Common Misconceptions about Trusteeship
The Reality
Managing a Special Needs Trust requires attention to all the traditional responsibilities of trusteeship investment management, accounting responsibilities, and tax return preparation. But in many (and perhaps most) cases, there are other, more frustrating and time-consuming challenges that lead to ‘trustee burnout.’ A trustee who expected to spend his or her time looking at investments and reconciling checkbooks may instead find herself involved in addressing the consequences of a beneficiary’s lack of executive functioning skills and poor judgment. There can be domestic disputes, financial abuse, and in some cases police involvement. In addition, a trustee may be faced with questions and continued criticism from remaining beneficiaries of the trust who continually second-guess the trustee’s distribution decisions, or a court-appointed guardian for the beneficiary who makes unreasonable demands for expenditures. A Trustee must understand all the laws, rules, and regulations of Medicaid so that the loved one does not lose his or her benefits for incorrect use of the trust assets. The Trustee must also understand the tax laws so that the monies are spent in such a way that there are no tax penalties.
An experiences special needs planning attorney should be consulted in assisting with the preparation of a special needs trust to preserve the loved one’s eligibility for Medicaid.
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