Many Florida residents need to ensure that a child with intellectual and developmental disabilities (“IDDs”) or other dependent is cared for. This is especially true after the caretaker or other responsible family member passes away. Unfortunately, there are risks in simply leaving an inheritance to ensure financial support for the dependent with IDDs. Receiving a large sum of money may result in the person with IDDs no longer being eligible or qualified for government benefits.
This is where a Florida supplemental special needs trust (“SNT”) becomes invaluable. However, a SNT is a specialized type of trust which will require legal assistance to set up. An attorney familiar with SNT is crucial for the proper establishment of this type of trust.
What is a Special Needs Trust?
A special needs trust is a certain type of trust designed to hold assets for the benefit of a person with IDDs, without affecting their ability to receive government “needs-based” benefits. Such benefits include Social Security Income (SSI), Medicaid, vocational rehabilitation, and subsidized housing. The assets in the SNT are effectively not “counted” in the person’s own assets. Accordingly, their eligibility and qualifications for these benefits are not affected.
On a high-level there are two different types of a SNT - a SNT established by the individual with IDDs or receiving needs-based benefits (first-party SNT) and a SNT established by the guardian or caretaker of the individual with IDDs (third-party SNT). A third-party SNT must be established by a “grantor” or “settler.” A trustee must be named to manage the trust. The trust must also have a beneficiary, i.e., the individual with IDDs for whom the trust is established.
What Does a Special Needs Trust Become Necessary?
The most common reason for a SNT is a person whose loved one has intellectual and developmental disabilities and will likely require lifetime care. This person could be a child, spouse, or other dependent. If correctly designed and implemented, the SNT allows trust assets to support the beneficiary without affecting their government benefits.
Another possibility is when the person with IDDs or receiving needs-based benefits receives an unexpected large sum of money, such as a personal injury settlement. This is when a first-person special needs trust may be advisable, which would be self-funded by that individual.
Allowable Disbursements from a Special Needs Trust
In order to not affect the SSI or Medicaid eligibility of the beneficiary of the SNT, only certain types of disbursements from the trust are allowed. These are typically food and shelter expenses paid to a third-party provider of such goods and services. Known as in-kind support and maintenance (ISM), such allowable expenses include food, rent, mortgage payments, and utility payments.
Other allowable disbursements include, but are not necessarily limited to, the following:
- Educational expenses;
- Medical services not covered by Medicaid;
- Psychological therapy; and
- Recreation and entertainment expenses.
The trustee of the SNT should not disburse cash or cash equivalents (debit or gift cards) to the beneficiary. Likewise, the trustee of the SNT should not make disbursements for any goods or services already paid for by another source
An Estate Planning Attorney Can Help Establish Your Florida Special Needs Trust
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