A Special-Needs Trust is a trust established for the benefit of a disabled beneficiary who is entitled to receive governmental assistance. The intent of the trust is to provide for the beneficiary above-and-beyond the supplemental assistance without accidentally turning that Federal aid “faucet” off. The correct drafting of this type of trust is very important since errors can result in the loss of government assistance or trust income.
The payment of income and principal should be entirely left to the discretion of the trustee and the beneficiary should never be given the option to act as their own trustee. In addition, cash payments should never be made directly to the beneficiary. Instead, the trust should simply pay for the items that are needed by the beneficiary. This is important because any money the beneficiary receives may reduce their Supplemental Security Income or may even cause a total loss of Medicaid benefits.
The beneficiary, or their guardian, will ask the trustee to make a distribution. The trustee will consider whether or not he or she is permitted to make the distribution and whether making the distribution is in the best interest of the beneficiary. If the trustee agrees to the distribution, the trustee will pay for the good or service directly from the trust account to the vendor.
Protective wording should be inserted in the trust to clarify that the trustee is to expend income and principal only after Federal, state, and local public assistance is received and exhausted. The income and principal should only be used for the benefit of the beneficiary. A spendthrift clause should also be included in the trust to avoid the possibility of the government’s attaching the trust property to be reimbursed for its public assistance payments.
Choosing an attorney to draft a Special-Needs Trust is not always an easy task. Drafting a Special-Needs Trust is highly specialized and you want someone who is experienced in this area. Choose someone whom you can trust and you feel comfortable with because the Special-Needs Trust will last for the lifetime of the beneficiary and your attorney will be a crucial part of your financial team.
Michael D. Wild is a Florida attorney specializing in the areas of estate planning and asset protection. For more information on successful Florida estate planning and asset protection techniques, please contact the South Florida law firm of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com to schedule your free consultation. Protecting what you value most.