As a Missouri estate planning attorney, I often work with families who want to plan for the future of a loved one with disabilities. One tool that comes up frequently in these discussions is the third-party special needs or supplemental needs trust. It is a practical option for ensuring financial support for someone with special needs without jeopardizing their eligibility for government benefits.
A third-party special needs trust is a legal document where someone, typically a parent, grandparent, or another family member, sets up a trust to hold assets for a person with disabilities. The key here is that the assets in the trust do not belong to the individual with special needs. Instead, they are contributed by a third party, hence the name. This distinction is critical because it allows the person with disabilities to continue qualifying for public benefits like Medicaid or Supplemental Security Income, which often have strict income and asset limits.
The trust is designed to supplement, not replace, government benefits. For example, the funds in the trust can be used for expenses like medical equipment, therapy, education, transportation, or even recreational activities that improve the persons quality of life. However, the trust cannot be used for things like food or housing, as those could affect benefit eligibility. A trustee, who is appointed to manage the trust, has the responsibility of making sure the funds are used appropriately and in the best interest of the beneficiary.
One of the biggest advantages of a third-party special needs trust is flexibility. The person creating the trust, known as the grantor, can decide how the funds are invested, who manages them, and how they are distributed. Unlike some other types of trusts, there is no requirement to pay back the government for benefits received when the beneficiary passes away. This means that any remaining assets can go to other family members or beneficiaries as outlined in the trust.
Setting up a third-party special needs trust requires careful planning. In Missouri, it is important to work with an attorney who understands both estate planning and the specific rules governing public benefits. The trust must be drafted with precise language to ensure it complies with federal and state regulations.
Another point to consider is who will serve as the trustee. This person needs to be trustworthy and capable of managing finances, as they will have significant control over the trusts assets. Some families choose a professional trustee, like a bank or trust company, while others select a family member. Either way, the trustee must understand the beneficiary’s needs and the legal requirements of the trust.
I have seen firsthand how these trusts can provide peace of mind for families. They offer a way to support a loved one with disabilities while preserving access to essential benefits. If you are thinking about setting one up, start by consulting with an experienced attorney to discuss your family’s unique situation. It is an investment in your loved one’s future that can make a real difference.
Dean M. Gerros
Attorney at True Estate Planning
This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between True Estate Planning and the reader.
