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Parents or caregivers who want to leave money to a loved one, child, or other family member with a disability may consider establishing a trust. However, how the trust is established is extremely important. Those who are disabled and/or of limited income often qualify for government financial assistance, such as Medicaid or Supplemental Security Income (SSI) benefits, leaving money to a disabled loved one could result in disqualification of eligibility for these types of benefits.
The problem of disqualification for government benefits may be eliminated by the establishment of a special needs trust. Often compared with a supplemental needs trust, the two trust types may sound like different things, but are actually the exact same , with the former being the more common term.
What Is a Supplemental Needs Trust?
Again, a supplemental needs trust is the exact same thing as a special needs trust. Following the 1993 passage of legislation providing for the authorization of creation of self-settled trusts, some people tried to introduce the term to distinguish between new trusts and third party trusts. However, today, the terms are used indistinguishably from one another.
A special needs trust is a type of trust that leaves money to the trust rather than to the child (or disabled loved one [“ beneficiary” ]). Rather than allowing the beneficiary to access the money directly, money in the trust is managed by a trustee. The trustee can use the money to purchase anything the beneficiary needs, ranging from clothing, to vitamins, to new furniture, but never allows the beneficiary to have control over the money. Because the beneficiary does not control the money, the assets in the trust are not considered when determining eligibility for government programs.
What Is the Difference Between a Special Needs Trust and a Pooled Trust?
In order for a special needs trust to work, the trust must be managed by an appointed trustee. In some cases, those who are establishing the special needs trust cannot find a trustee that they believe is appropriate for the job. When this is the case, the establishment of a “pooled trust” may be considered.
Unlike a special needs trust, a “pooled” special needs trust is established and managed by a not-for-profit, third party entity. A pooled trust accepts contributions from a wide number of parties, and is usually considered a stable option. The pooled trust is managed by the third party, which, just like a trustee, has discretion regarding disbursement of funds and is up-to-date on all the current rules, regulations and laws governing special needs trusts and government benefits eligibility.
Understanding Special Needs Trusts in Massachusetts
Providing for a disabled loved one is no doubt at the top of your priority list. However, certain contributions and trusts may disqualify your loved one from receiving state or federal benefits that they very much need. To learn more about how you can preserve the right to benefits while also providing your loved one with necessary financial support they require, please contact Patricia Bloom-McDonald, Attorney at Law, today. Serving Westport, Canton, and surrounding areas of Massachusetts, Patricia Bloom-McDonald will meet with you as soon as possible. Call her law offices now at 508-646-9888, or write her a message using this online form.