Consider Supplemental Needs Trusts for Special Children

Last week, Daily Local News Staff Writer Danielle Lynch reported the results of a two month investigation on special needs children in an excellent three part series, “Special Children, Special Needs.”  The series incorporated interviews with lawmakers, teachers, parents, coaches, administrators, advocates, and program innovators and organizers to provide an intense and insightful view into the world of special needs children, their families and caregivers.

As the population of special needs children in the school system continues to grow, creative solutions are needed and parents require access to information on programs and support.  In the West Chester Area School District, due to the organizational efforts of Peggy McCaughern, a parent herself, a Parents Support Group meets each month at the Spellman Building with a speaker addressing subjects of special interest.

As special children and their parents age, another issue to consider is the availability of financial assistance and benefits protection beyond the school years.  Parents and grandparents want to set aside funds to provide for a special
child well into the future.  Because public benefits are based on indigency, if these funds are placed in a regular or “support” trust or are given directly to the older child or are inherited, the fact that they are available generally means they will disqualify the special needs child from public benefits including Medicaid and SSI (Supplemental Security Income).   The problem generally becomes an issue when the special child reaches majority and qualification is based on her own income and assets.

How this issue of providing for a special needs child as he ages while still allowing him to qualify for benefits can be handled is the subject of multiple legal seminars and treatises.  It is also a driving force behind the founding of the Academy of Special Needs Planners, www.specialneedsplanners.com, one of two national organizations of attorneys devoted to special needs, the other being the Special Needs Alliance.  In March, 2007, I had the privilege of traveling to Stone Mountain, Georgia and becoming a Charter Member of the Academy of Special Needs Planners which provides regular support and contact for attorneys in the field.

If Medicaid is complicated for practitioners when dealing with elders, especially since passage of the federal Deficit Reduction Act in 2006, special needs planning can be even more involved since it may involve two systems,
the Department of Public Welfare for Medicaid and, because Supplemental Security Income is administered through the Social Security system, the Social Security Administration.   Also, the goal usually for special needs children is to be maintained in the community or in a community-like supportive environment indefinitely.

Trusts, called supplemental (or special) needs trusts, if properly drafted and administered, can allow special children who are otherwise medically eligible to continue to qualify for government benefits while receiving additional funds.    Space does not allow for a detailed explanation but a summary is below.  Interested readers can also consult the web site of the Academy of Special Needs Planners at www.specialneedsplanners.com and click on the parents’ section.

What is a supplemental needs trust?  A supplemental needs or special needs trust is drafted to allow a disabled beneficiary to receive funds including gifts, lawsuit settlements, inheritances and other assets and not lose eligibility for certain government benefits.  The trust is intended to be in addition to public benefits, to “supplement and not supplant” government benefits received under programs, especially Medicaid.

Some trusts, known as (d)(4)(A) or Payback Trusts, can only be established when the beneficiary is under age 65 but the beneficiary’s own funds can also be used so that, if properly structured, lawsuit settlement proceeds or an inheritance, for instance, can be placed in trust for the special needs person’s benefit.

Pooled Trusts are subaccounts of larger trusts established by groups such as the Arc Community Trust.

Common law supplemental needs trusts can be established by Will or by a Trust document and then funded through the Will, gifts, or life insurance.  Distributions from common law supplemental needs trusts must be totally discretionary with the Trustee or the funds are considered available to the special needs person.

A supplemental needs trust may be used for, among other things, education, recreation, counseling, travel, therapies, and medical and dental needs not covered by Medicaid as well as equipment such as specially equipped vans, payment for a companion and other payments to enhance quality of life.  Payment may not be distributed directly to the beneficiary.

About the Author Janet Colliton

Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.

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