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Helping You Navigate Complex Legal Issues

Using special needs trusts to assist people with disabilities

Gregory A. Lang

Many Minnesota parents of children with special needs want to provide financially for their heirs and not interfere with government benefits. A special needs trust established for a person with a disability does not affect his or her eligibility for Social Security or Medicaid.

A special needs trust is not counted among the beneficiary's assets, so it can be used to cover costs outside of the realm of government benefits. Those establishing the special needs trust must name it as the heir of life insurance policies, wills and other documents in order for these assets to be eligible for inclusion in the trust. Family members who wish to give gifts or provide financial assistance to their loved one with a disability can also contribute directly to the trust.

A special needs trust can provide supplemental funds to the beneficiary. The trustee may disburse funds to cover transportation, education, medical equipment, medical care and additional costs that the person's government benefits do not cover. These funds may not be used for food, housing or other expenses that the beneficiary's government income is intended to cover, and they may not be disbursed as cash to the beneficiary. If a trust is used to cover these types of expenses, the beneficiary's benefits may be reduced or terminated.

While any parent or grandparent of a child with a disability can establish a special needs trust, many people benefit from the advice of an estate planning attorney. Attorneys who are experienced with special needs trusts often have the knowledge to help protect the beneficiary's interests in accordance with state laws regarding asset limitations for people receiving government benefits.

Source: Pacer.org, "The Special Needs Trust", October 12, 2014

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