Supplemental Needs Trusts for Special Family Members

  •   |   Meghan Freed

One major concern for families who have a family member with special needs is what happens to that person when his or her primary caregiver or advocate, often a parent or family member, passes away or is unable to continue as the primary caregiver.

Proper estate planning can assist the family in ensuring the continued well-being of their family member, including providing continuity of services and maintaining those State and Federal benefits to which the disabled person in entitled. Freed Marcroft helps our clients achieve this through the use of supplemental (also called “special needs”) trusts.

A supplemental needs trust is a trust for a person with a disability who receives important public benefit programs — for example, Medicaid, Supplemental Security Income (SSI), or Social Security Disability Insurance (SSDI). At Freed Marcroft, we view the main purpose of supplemental needs trust as twofold: (1) to make assets available for the benefit of the person with special needs, without those assets counting against that person’s eligibility for public benefits, and (2) enhancing the beneficiary’s quality of life.

There are two main categories of supplemental needs trusts: a first party (or “self-settled” trust) and a third party trust.

A first party supplemental needs trust is a self-funded. The person with disabilities creates the trust, funds the trust, and is the trust’s beneficiary. Sometimes the beneficiary has funds because he or she inherited money directly or received a settlement in a lawsuit. With a first party trust, if there is money in the trust after the death of the beneficiary, the state Medicaid agency must be repaid for benefits the beneficiary received. This is commonly referred to as the “payback provision.” Although remaining funds must be returned to the state, the first party trust is important because it ensures a loved one has sufficient resources to live and thrive without sacrificing his or her state and federal benefits.

A third party supplemental needs trust is trust is created by a third party (not by the disabled individual) and funded with assets of that third party. Often a third party trust is established by a parent or grandparent, but it can be established by anyone and funded at any time, and other family and friends may also contribute to it. One main difference between a third party trust and the first party, self-settled trust described above is that with third-party trust, the grantor — the person who creates the trust — may choose where any remaining funds in the trust go. In other words, money left in the trust after the disabled beneficiary passes away can be left to the grantor’s family, friends, or favorite charities, rather than to the state.

Please contact us if you believe Freed Marcroft may be able to assist you in planning for the future of a family member with a disability through the use of special or supplemental needs trusts. We are proud to be associated with The Planned Lifetime Assistance Network (PLAN) of CT, a non-profit organization who serves as trustee of supplemental needs trusts and provides continuity of services after a beneficiary’s principal advocates or care-givers have passed away or are unable to continue serving in those roles.

It is part of PLAN’s mission to accept trusts of all sizes, ensuring that a family does not have to be “rich” to help their family member.

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Freed Marcroft LLC

Freed Marcroft LLC