A Supplemental Needs Trust, also known as a Special Needs Trust, is an estate planning tool used to allow assets to be held in Trust for the benefit of a physically or mentally challenged individual, or a person with a chronic or acquired illness. This type of Trust allows supplemental and extra care over and above any benefits provided by the government.
Why would someone creating an estate plan choose to use a Supplemental Needs Trust rather than simply leaving them money? Assets of an individual are reviewed to qualify a person for government benefits, such as Medicaid, subsidized housing and other need based benefits. Should money or another asset be given to a person with special needs, it could disqualify them from receiving benefits. In fact, receiving as little as $2,000 could disrupt a person’s need-based benefits.
To deal with this Catch 22, in 1993, Congress authorized the use of Supplemental Needs Trusts to benefit individuals under the age of 65 who are disabled according to Social Security guidelines. Many types of assets are permitted to be held in this Trust, including stocks, bonds, cash, certificates of deposit or real estate.
While the government benefits can be used for basic living and medical expenses, the trust is able to pay for additional expenses, such as entertainment needs, vacations, uncovered medical expenses or social events.
A Supplemental Needs Trusts is an estate planning tool that should be investigated by any family with a physically or mentally challenged or chronically ill family member. If you live within the state of New York, consult a New York attorney with estate planning experience, as trusts are complex, state-specific documents that should be tailored to the needs and circumstances of the individuals involved.
Michael Robinson, Estate Planning Attorney
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