If you have a family member or loved one with special needs, there are certain situations where they might require additional help and consideration. You want to make sure that they will always receive proper care, even if you’re no longer around to assist them. With a Special Needs Trust, you can protect the estate and inheritance of your loved one while ensuring that their long-term needs will be taken care of. You can preserve their assets without jeopardizing their government health care benefits. Fortunately, there are several different types of Special Needs Trusts available – let’s take a look.
General Support Trusts
A General Support Trust is common for special needs individuals who have a large number of assets. They do not need to rely on government health benefits such as Medicare or Medicaid for help. A General Support Trust controls those high-value assets and provides for the individual’s needs throughout their life. If a parent or grandparent uses their own assets to set up a general trust for a special needs family member, this is known as a Third Party Trust. The assets in the Third Party Trust will support the special needs family member for their lifetime while passing any money left at the death of the beneficiary on to whomever the parent or grandparent chooses.
Supplemental Care Trusts
A Supplemental Care Trust (also known as a self-settled special needs trust) also supports an individual’s needs, but it’s secondary to government benefits. In other words, the government will cover the individual’s needs first, and then the Supplemental Care Trust will cover anything above and beyond that. With a Supplemental Care Trust, Federal law requires that an individual, his parent, grandparent, guardian, or the court create the trust before the special needs individual turns 65-years-old. The trust is funded with the individual’s own finances or assets. Only the special needs individual can benefit from the Supplemental Care Trust; when they pass away, any remaining funds must be used to pay back any state agency, such as Medicaid, for services covered by the state agency.
Pooled Trusts allow a special needs individual to maintain their eligibility for government assistance, while also holding assets that might have otherwise disqualified them. There are two types of Pooled Trusts: Medicaid Payback Trusts and Pooled Account Trusts.
With a Medicaid Payback Trust, when the special needs individual passes away, the trust must “pay back” any Medicaid benefits. The trust must reimburse the government first, and then any remaining assets can be distributed to the other trust beneficiaries (ex: family members, friends, etc.).
With a Pooled Account Trust, a nonprofit charitable organization establishes and administers the trust on behalf of the special needs individual. Family members can still advise the organization about the individual’s needs. When the individual passes away, the funds remaining in the Pooled Account Trust can be left to the nonprofit organization; in this situation, the trust does not have to reimburse Medicaid. However, if the assets remaining in the Pooled Account Trust are passed to family members (not the nonprofit), then the trust has to repay any Medicaid benefits. An example of a Pooled Account Trust in Georgia is the Georgia Community Trust of BDI.
Have Additional Questions? Contact Brian M. Douglas & Associates
Special Needs Trusts provide a variety of benefits, depending on the individual’s needs and financial situation. If you have questions about the different options available, our estate planning team would be happy to discuss what trust(s) would be best for you or your loved one. If you’d like to schedule a consultation, please reach out to us at (770) 933-9009 or via our online contact page.