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How to use a trust to provide for your disabled child

On Behalf of | Mar 6, 2021 | Elder Law

You have a disabled child and worry about how you will provide them with stability after you die. How do you plan for the inevitable? A good option for you may be a Special Needs Trust.

Special needs trusts, a type of Medicaid trust, allow you to leave assets in a way to preserve your child’s access to government benefits. The Social Security Administration outlines the rules the trust must follow to protect your child’s future needs.

Creating the trust

A special needs trust can be a first-party trust or a third-party trust. Since you are making the trust, the SNT is a third-party trust. The SSA also allows for other family members, such as a grandparent, to make one. You can add the SNT as part of your overall estate plan.

You will need to pick a person responsible for the trust and disburse monies that do not duplicate Medicaid benefits. To maintain eligibility, your child cannot manage or control any assets in the SNT. The trustee you choose will have complete discretion over the distributions he or she makes on behalf of your child.

Knowing about in-kind support and maintenance

SSA will count some SNT distributions as income, so the trustee must know what Medicaid and SSI cover. In-kind support and maintenance include:

  • Food
  • Mortgage
  • Rent
  • Gas
  • Electric
  • Water
  • Sewer

As part of the trustee’s job, he or she has to report all income and deductions. Any payments made toward ISM by the trustee may reduce your child’s SSI payments.

Some expenditures that SSA may not consider income include internet services, cellphone payments and dentists or doctors not covered by Medicaid.