What is a special needs trust and what is it used for?
Special Needs Trusts are established for individuals with developmental and/or intellectual disabilities to supplement their needs while preserving the benefits they receive from the federal, state and local agencies. They can be established by a parent or a grandparent, and are often funded by an inheritance from a family member.
When an individual with developmental disabilities receives funds directly from an accident or other type of injury lawsuit, these funds can be subject to claims from health insurance companies, Medicaid and other creditors. These self-settled trusts must comply with federal and state law, and there are reimbursement requirements. These trusts, also called D(4)(a) Trusts, must file an annual accounting with the State.
Special Needs Trusts are often called “Supplemental Needs Trusts,” because they supplement the quality of life for a person with disabilities. For example, they can be used to purchase physical and emotional therapy and counseling in addition to the benefits already provided by a government support. They can be used to purchase assistive technology, travel, and additional nursing and respite care.
For a more comprehensive discussion of this topic, please refer to Chapter 7 of A Layperson’s Guide to Estate Planning, which can be obtained by download at www.jalistlaw.com or by contacting The Law Offices of James A. List, LLC at 410.337.5340.