Supplemental Needs Trusts
If you are the person in Scenario 1 from Part 1 of this series (the parent
or grandparent of a child with special needs), and you wish to provide
your loved one with additional supplemental services or support beyond
what is provided by needs-based benefit programs you may choose to set
up a Supplemental Needs Trust during your lifetime.
A properly drafted Supplemental Needs Trust can be established during your
lifetime either as a stand-alone trust, or within a Will. There are many
factors that will help determine how the trust should be set up; a qualified
special-needs planning attorney should review these with you. The financial
and personal circumstances of both you and the beneficiary are important
One of the most attractive benefits of these kinds of trusts, at least
currently, is that there is no payback provision required. This means
that the trust will not have to pay back the cost of any Medicaid services
provided to the beneficiary during his/her lifetime. This is one reason
why it is important to evaluate the need for a special needs planning
for children as soon as possible rather than waiting until a child with
special needs receives an inheritance. Additionally, these kinds of trusts
are currently not subject to any age or disability requirements.
A Note on Gifts to Siblings:
Every now and then I will get asked whether or not a parent or grandparent
should give the assets intended for their special needs child to the sibling
of the special needs child instead. Their goal is to avoid the cost and
complexity of setting up and administering a supplemental needs trust.
There are many problems with this sort of “planning.”
Giving the assets to the sibling via gift or an inheritance could end up
exposing the assets to the creditors of the sibling, or to a divorce proceeding.
Distributions made by the sibling to the child with special needs could
also result in a loss of eligibility of certain governmental benefits,
or unintended tax consequences. The sibling could become incapacitated
and the funds may become unavailable for anyone else’s use as a
result. Or, the sibling may end up misappropriating the funds.
If you have a child or grandchild with special needs, or you are currently
receiving needs-based benefits and have received a large sum of money,
please contact us to discuss how we may be of assistance. We can be reached
at (203) 651-5521.