Will a Special Needs Trust Affect My Child’s Government Benefits?

“Will the trust affect my child’s benefits?” In over 25 years of practicing law, this question is constantly asked. The irony of the question is that the client is coming to the office with the understanding that they will be receiving an affirmative response to that concern.

The purpose of a special needs trust is twofold. First, for individuals who may suffer from any form of cognitive impairment, the trust is a proper vehicle to minimize the exposure of a disabled individual from the influence of predators. Second, yet primarily, it is to insure that the needs-based benefits to which the beneficiary is receiving are preserved. Although there are many technical requirements which need to be met in the drafting of a special needs trust, the key terminology is that the trust is to supplement, not replace needs-based government benefits.

The two primary forms of needs-based benefits are Supplemental Security Income (SSI) and Medicaid. In order to be eligible for these benefits, the recipient must meet two criteria. First, he or she must be unable to work to an extent that they could earn over a certain amount of income per month. (For 2016, this figure is $1,130 per month.) Second, the applicant for these benefits must not own countable (typically liquid assets) in excess of $2,000.

Recently, the judicial system clarified that Special Needs Trusts preserve eligibility for Section 8 housing. In Massachusetts, Kimberly DeCambre, an individual with a disability, was and is the beneficiary of a Special Needs Trust and $60,000 of distributions were made on her behalf over time. The Brookline Housing Authority, which oversees Section 8 housing in her area, declared that these distributions were to be deemed income to her and, thus, making her ineligible for the residential program. After an appeal from the District Court of Massachusetts, the United States Court of Appeals for the First Circuit ruled that neither the assets in a Special Needs Trust nor the distributions made therefrom could be counted as assets or income of the disabled beneficiary. The Court relied not only on Social Security concepts, but the exemptions set forth by the Department of Housing and Urban Development (HUD). The Court asserted that neither Congress nor HUD would intend to have a Special Needs Trust impact an individual’s eligibility for Section 8 benefits.

Thus, it continues to be clear that a Special Needs Trust is not only a viable but the best means to insure that an individual with disabilities can have a pool of assets set aside for him or her to enhance their quality of life while maintaining their eligibility for benefits that will provide them with income, health insurance, and housing.

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Thomas D. Begley, III

About the Author

Thomas D. Begley, III is the co-chair of the Trusts & Estates Group at Capehart Scatchard. He is a Certified Elder Law Attorney (CELA) who earned both his undergraduate and law degrees from Georgetown University, located in Washington, D.C. He concentrates his practice in the areas of estate and tax planning, estate administration, small business representation, elder law, and probate litigation. He is an accomplished author and lecturer who has frequently spoken on behalf of the National Academy of Elder Law Attorneys and the New Jersey Institute for Continuing Legal Education as well as other professional organizations. He has been named a “Super Lawyer” as voted by his peers and facilitated by New Jersey Monthly in the area of Trusts and Estate Litigation on numerous occasions. He has attained the prestigious AV rating by Martindale-Hubbell.

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  1. Tawny says:

    There is a critical shortage of invirmatofe articles like this.

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