A disabled person unable to obtain or maintain a stable income due to their disability may be eligible to receive government assistance—e.g., Medicaid, subsidized housing, and Supplemental Security Income (SSI), among others. Income must be under a certain level to qualify.
Receiving an inheritance may pose a problem for a person in this position, since the acquisition of significant assets or property may bump their income above the allowable income threshold, disqualifying them from benefits, sometimes for years.
One way to address this scenario is a “special needs trust.”
This trust can be set up privately or by court order. Someone other than the beneficiary will be appointed as trustee to manage things. The trust cannot be distributed for basic needs, meaning food, clothing, and shelter (and matters related to those things). It can be distributed for anything that is not food, clothing, or shelter (e.g., recreation, pet care). The trust may also be distributed for medical needs not covered by government programs. Since the trust is not to be used for basic needs, the person remains eligible for government assistance in basic-needs areas.
Without a special needs trust, an inheritance is viewed as available income to pay all the costs of daily living, which may disqualify the disabled person from receiving government benefits.
Any trust must be disclosed when applying for Medicare or Social Security Disability, and comply with all federal and state guidelines.
The laws involved in special needs trusts are complicated, and each case is unique. Contact our firm for the guidance you need.