Careful estate planning is necessary when planning for children or relatives with disabilities. The term “special needs” it is commonly used where there is someone in the family who is unable to make necessary legal, financial and overall life decisions for him or herself. The biggest fear is often “Who will take care of my loved ones and how will they be provided for after I am gone?” A Special Needs or Supplemental Needs Trust is a trust that preserves your loved one’s ability to receive Supplemental Security Income (SSI) and Medicaid benefits and can help you establish your wishes for how your loved one is provided for after your death.

Owning a house, a car, furnishings, and some other personal items does not affect eligibility for SSI or Medicaid. But other assets, including having too much cash in the bank, will in fact disqualify your loved one from benefits.

Leaving money outright to your loved one will often disqualify him or her from their ability to received benefits, and it generally is not prudent to leave a person with special needs a large sum of money.

Instead of leaving money or other property directly to your loved one, you leave it to the Special Needs Trust. You also choose a trustee to have the discretion to disburse the money on behalf of your loved one. Corporate trustees, like Coral Gables Trust Company, have the experience in meeting all of the requirements regarding how the money is spent so that government benefits are maintained. Unlike a regular trust, the trustee of a Special Needs Trust should not give money to the beneficiary directly. Instead, the trustee spends the money from the trust to pay for goods and services for the beneficiary. Special needs trust funds are commonly used to pay for personal care attendants, vacations, home furnishings, out-of-pocket medical and dental expenses, education, recreation, vehicles, and physical rehabilitation. You can even hold a residence inside a Special Needs Trust.

Because the trustee controls the funds in the trust, the government will ignore the assets inside of it when it comes to your loved one’s eligibility for benefits. There are two main types of Special Needs Trusts that are set up for individual beneficiaries. These are the first-party trust and the third-party trust.

The reason there are different types of special needs trusts relates to regulations regarding SSI, which is a government program that assists people with low incomes who have special needs. In order to qualify for SSI, an applicant or beneficiary can have only $2,000 in his or her own name. If the person has more than $2,000 in his or her own name, the government allows him or her to qualify for SSI so long as the assets are placed into a first-party special needs trust. When the beneficiary dies, any assets remaining in the trust are used to reimburse the government for the cost of his or her medical care.

The third-party special needs trust is set up by parents or relatives of a person with special needs. The assets held in the trust do not affect an SSI beneficiary's access to benefits and the funds can be used to pay for the beneficiary's needs beyond those covered by government benefits. This type of special needs trust does not require reimbursement to the government when the beneficiary dies. Instead, any funds remaining in the trust can pass to other family members, or to charity, just like a standard trust.

While a special needs trust is not the perfect solution in all cases, it can solve many of the problems that exist when planning for loved ones with disabilities.