Continuing from yesterday, Schmidt & Lerner, LLC drafts special needs trusts for either of two purposes. The general support special needs trust is designed to be the primary means of income and support for the beneficiary with special needs. How completely a general support trust is able to support someone depends on many factors including the amount of property held in trust and the degree to which the beneficiary requires help. In some respects, the general support special needs trust is not terribly different from other trusts because it does not require the drafting attorney to work around eligibility rules for various benefits. Unlike many trusts, however, the general support trust usually does not distribute all property and terminate when the beneficiary attains a predetermined age or meets predetermined conditions. The purpose is to provide the beneficiary with special needs with capable care and assistance for the longest possible duration.

Because general support trusts typically distribute assets quite freely on behalf of the beneficiary, the beneficiary is usually ineligible for means tested government benefits. Necessarily exclusive of the general support trust, the supplemental care special needs trust is designed to allow a beneficiary with special needs to remain eligible for government benefits. In other words, a person with special needs will not be the beneficiary of both a general support trust and a supplemental care trust because the purpose of the former defeats the purpose of the latter.

An example. SSI may not be available if the beneficiary with special needs has in excess of $2,000 in monthly “countable resources.” Please note, laws and regulations change so this amount may not be the current amount and it has historically been higher for a married beneficiary. To determine countable resources, the responsible agencies consider, among other things, inherited property, property received from legal settlements, and income. Income is broadly defined to include both cash and “in kind” income like clothing, food, and shelter. After the beneficiary’s applicable exclusions are factored in, countable resources are what remain. The method and the rules may be somewhat different for various other benefits such as Social Security Disability, Medicare, or Medicaid.

The supplemental care special needs trust limits what the trustee may distribute to the beneficiary in order to preserve the beneficiary’s benefits. As previously noted, laws and regulations change so supplemental care trusts often direct the trustee to distribute the maximum amount (rather than a fixed amount) that will allow benefits to remain intact. Reviewing eligibility rules and maintaining the right balance of flexibility for the trustee can make drafting a supplemental care special needs trust a somewhat complicated task but it is often necessary for beneficiaries with more limited resources. When you and your estate planning lawyer draft a supplemental care trust, it can be helpful to do so in conjunction with your accountant and your financial advisor.