Five Things to Consider When Setting Up a Special Needs Trust

Joanne Marcus, MSW, Commonwealth Community Trust
Five Things to Consider When Setting Up a Special Needs Trust

Very often, a trustee is needed when a person who has suffered a brain injury is receiving a personal injury award. In addition, families want to be able to leave funds that will enrich the quality of life of their loved one when they are no longer alive.

Why establish a Trust

A trust allows the Grantor — the person establishing the trust — the opportunity to create a trust that will enrich the quality of life of the beneficiary who is living with a brain injury or other disability. The recipient may be applying for or receiving Medicaid and Supplemental Security Income (SSI) and want to protect benefits that are crucial in providing medical care and income necessary for support. In order to qualify for these benefits, the individual can have no more than $2,000 in cash assets. A monetary gift, settlement, or inheritance will disqualify the Beneficiary from receiving these benefits.

A trust can be used, for example, to purchase a wheelchair, dental services, eye glasses, hearing aids, education, recreation, travel, transportation, furniture, electronic equipment, and clothing.

Two Types of Trusts: Third Party Special Needs Trust and Self-Funded Pooled Disability Trust

  • The third party Special Needs Trust (SNT) is funded by a third party, usually a close family member, and can be coordinated with the family’s estate plan. The SNT holds funds that the grantor leaves for the beneficiary’s benefit.
  • The self-funded Pooled Disability Trust (PDT) is funded by the person with a disability, generally through a personal injury award. This trust is sometimes referred to as a Medicaid payback trust as people who receive Medicaid will have to pay back the state for medical expenses incurred on their behalf with funds remaining in the trust after the death of the beneficiary.

Advantages of a Nonprofit Organization

The pooled trust program is administered by a nonprofit corporation and has the advantage of lower administrative costs and greater opportunity for investment potential. While the funds are pooled for investment purposes, individual sub-accounts are maintained and financial reports are provided. Staff are experienced and knowledgeable about the needs of people with disabilities and the rules that will protect SSI and Medicaid. There is no minimum amount required to establish the trust.

Who to Call

Once you are ready to establish the trust, you can contact organizations like Commonwealth Community Trust (who can serve as the trustee) and the Special Needs Alliance (who can connect you with an estate planning attorney). Because the regulations are complex and constantly changing, it’s important to select an attorney or nonprofit that specializes in these types of trusts.

Role of the Trustee

Both trusts require that a trustee be designated. The trustee manages and invests the funds for the trust and approves disbursements that are for the sole benefit of the beneficiary. The trustee is knowledgeable about government agencies providing benefits and staying abreast of changing regulations.

Role of the Advocate

An advocate is designated by the grantor (individual funding the trust) and is generally someone close to the beneficiary such as a family member, guardian, conservator, case worker, power of attorney or, depending on the nature of the disability the beneficiary. The advocate works closely with the trustee in submitting requests for disbursements that will maintain the quality of life for the beneficiary. The grantor can complete a set of instructions (forms are available to assist in this) indicating their vision for the trust.

Joanne Marcus, MSW is Executive Director of the Commonwealth Community Trust (CCT). CCT is a national nonprofit organization established in 1990 by concerned citizens and parents of children with disabilities to provide an effective and affordable administration of third party Special Needs Trusts and self-funded Pooled Disability Trusts.

Posted on BrainLine June 24, 2010.

From Joanne Marcus, MSW, executive director, Commonwealth Community Trust. Used with permission. Click here for additional information, FAQs, and trust documents. Or call  toll-free: 888-241-6039.