Planning for a Disabled Person

Planning for a disabled individual presents a unique challenge. Many disabled persons receive government benefits such as Medicaid or Supplemental Social Security (SSI). If you leave your estate outright to someone who is qualified to receive government funds, your estate will be used to replace the government benefits. Thus, your beneficiary will not receive any advantages from your bequest. Is there a way to give an inheritance (or gift) to a disabled person receiving government benefits?

The answer is a Supplemental Needs Trust. A Supplemental Needs Trust can be a living trust or a testamentary trust (a trust created in your will). The trust will pay for items that are not covered by a government program. Depending on the needs of the disabled individual, the supplemental needs trust could pay for such items as hair cuts or styling, automobiles, televisions, radios, computers, vacations, insurance, home maintenance, etc. A supplemental needs trust is used to make the disabled person's life more comfortable. At the disabled person's death, the remainder of the trust can be distributed in any manner the creator of the trust desires.

If the disabled person has assets and is under the age of 65, he or she can set up a Special Needs Trust with his or her own funds. Such a trust is known as a "pay-back" trust because at the person's death, the government must be paid back for Medicaid disbursements made on behalf of the individual. However, during the person's lifetime, the trust can supplement government funds received by the individual in much the same way that the third-party trust (a trust created by another person) can.

The disabled person may also place assets into a Pooled Trust. If the disabled person is over the age of 65, this is the only option the person has for depositing his own funds into a trust to pay for his supplemental needs (needs not being met by governmental programs). The Pooled Trust is formed by a Not-For-Profit organization. The non-profit organization sets up a separate trust account for the individual and manages it on her behalf. Upon the disabled person's death, the remaining assets are either paid back to the government or remain in the trust to be used for the benefit of other disabled individuals.

A Supplemental or Special Needs Trust may be the answer for individuals struggling to find a way to add comfort and pleasure to a disabled person's life as opposed to merely giving an inheritance or gift that will end up just replacing governmental benefits.