When to Recommend a Special Needs Trust for a Settling Client

HomeTrusts and Asset ManagementWhen to Recommend a Special Needs Trust for a Settling Client

A special needs trust may be an appropriate planning tool for a client who has a disability and has been awarded money from a lawsuit— and the client wishes to maintain eligibility for government benefits like Medicaid and SSI. This article discusses situations when a special needs trust may be appropriate for a settlement recipient.

When is a Special Needs Trust Appropriate to Use?

Special needs trusts are designed to protect a disabled client’s eligibility for SSI (Supplemental Security Income) and Medicaid benefits. SSI and Medicaid—which generally go hand in hand—are needs-based, which means that they are based on a client’s assets and income.

If SSI and Medicaid Eligibility Needs to be Protected

If a client may receive a settlement that would put their assets over the eligibility limit for Medicaid and SSI because of a settlement, then a special needs trust might be appropriate to use in their situation.

This is because once a client puts their settlement money into the special needs trust, it allows them to continue to receive SSI and Medicaid benefits. And, because the money inside the trust is not counted against them for eligibility purposes, the money inside the trust can be used for anything that the client may need, except for what SSI is already paying them for (i.e., food and shelter expenses).

If the Beneficiary Cannot Manage Their Own Finances

For clients who may have disabilities or those whose condition makes them unlikely to wisely manage their finances, a special needs trust might be a good option to consider. In a situation like this, a special needs trust can help the beneficiary spend their money wisely, especially when the trustee of the trust is experienced in handling the unique needs of those with disabilities.

If the Beneficiary Needs to be Protected From Predators

Another good use of a special needs trust is to help protect a client with a disability that may be at risk of being victimized by predators. It is not uncommon for unscrupulous people to target and take advantage of people with disabilities. A special needs trust can also help prevent unchecked spending because the beneficiary has no control over the funds of the trust—only the trustee does.

Should I Establish a Special Needs Trust for My Client?

If you have a client who wants to protect their SSI and Medicaid eligibility when they receive a settlement, you might want to consider establishing a special needs trust for the client. Using a special needs trust is a great way to allow your disabled clients to protect their benefits — and all the funds inside the trust can be used to pay for supplemental needs or other items that could improve their quality of life.

If you have any questions about special needs trusts, we can help guide you through the whole process. Please use the button below to book a call. We’ll discuss the situation and explore whether using a special needs trust makes sense.

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