While federal and state government programs often provide assistance for people with disabilities, these typically only cover essential needs. Not only that, but individuals and families who have income higher than the limits set by these programs may get no help at all, even though medical needs may be much too high for most people to pay.
The answer for many people with disabilities is a special needs trust.
How does a special needs trust work?
Any trust is an entity that can own assets. When people transfer their assets to an irrevocable trust such as a special needs trust, the law no longer considers them to be the owners. Therefore, when they report income and apply for government assistance, the assets in trust do not count against them.
A trustee who is not the beneficiary manages the assets and supplies the amount of income or makes the necessary arrangements to cover expenses directly from the trust.
Who can set up a special needs trust?
Parents, grandparents and legal guardians who have a child with disabilities may set up a third-party special needs trust on behalf of the child. This can provide ongoing support long after they reach retirement or die, so the child can continue to receive the benefits for life. After they set up the trust, others may contribute to it, as well.
Until 2016, adults could not set up special needs trusts on their own behalf. Someone could receive a settlement, judgment or inheritance after the onset of the disability that would disqualify him or her for benefits. Through a first party special needs trust, adults can protect their assets and their benefits.