If you have a relative who has a disability, you may have concerns about his or her ability to pay for basic living expenses and medical care. You may also worry that your loved one may be vulnerable to financial abuse. Setting up a special needs trust may put your mind at ease.

A special needs trust is an important estate planning tool. With this type of trust, you set aside funds for your relative’s benefit. Because you do not transfer ownership to him or her, your loved one continues to be eligible for means-tested government assistance, like Medicaid or Supplemental Security Income.

Allowable expenses

If maintaining eligibility for financial help is a priority, the special needs trust must not pay for the same expenses that government programs cover. Therefore, it may be useful to refer to the trust as a supplemental needs trust.

Rather than paying for housing, utilities, fundamental medical care and other related costs, disbursements from the trust may only go to supplemental expenses. These typically include the following:

  • Housing modifications
  • Vocational training
  • Travel expenses
  • Hobby costs
  • Restaurant meals
  • Other similar expenses

The special needs trustee

You do not have to monitor fund disbursements to ensure they do harm your loved one’s eligibility for government help. When you establish the trust, you choose a trustee to manage it. Along with investing trust funds and performing recordkeeping duties, this individual approves all fund disbursements.

More importantly, the special needs trustee acts as a fiduciary for the beneficiary. This means the trustee may connect your relative with services he or she is having trouble accessing.

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