A supplemental needs trust (also known as a “special needs” or “(d)(4)(a)” trust) allows a disabled beneficiary to receive gifts, lawsuit settlements, or other funds while maintaining their eligibility for certain government programs. These trusts are carefully drafted so that the funds will not be considered assets of the beneficiary in determining their eligibility for public benefits. A supplemental needs trust can be a very effective way for SSI beneficiaries to enhance their quality of life.
SSI, or Supplemental Security Income, is a federal program that provides monthly cash payments to people in need. SSI is for people who are 65 or older, as well as for blind or disabled people of any age, including children. To qualify, you must have assets valued at less than $2,000 if you are single or less than $3,000 if you are married, not including the value of your home and certain other resources.
Many SSI recipients rely heavily on this monthly income to provide for their basic support. While a financial windfall, such as a litigation settlement, may provide short-term relief, it can also jeopardize the recipient’s long-term benefits which they will eventually need again. To avoid this conflict, a supplemental needs trust can be set up, not to provide basic support, but to pay for the comforts and extra amenities are not available from public assistance. A supplemental needs trust can be used to pay for things like education, recreation, counseling, and medical attention—basically anything needed by the recipient aside from basic food, clothing and shelter.
Very often, supplemental needs trusts are created by a parent or other family member for a disabled child (even though the child may be an adult by the time the trust is created or funded). Such trusts can also be created in a will as a way for an individual to leave assets to a disabled relative. A supplemental needs trust can also be funded by the disabled individual himself. These “self-settled” trusts are frequently established by individuals who become disabled as the result of an accident or medical malpractice and later receive the proceeds of a personal injury award or settlement.
A self-settled supplemental needs trust, also called a “(d)(4)(A)” trust, is created with the assets of a disabled individual under age 65, but must be established by his or her parent, grandparent, legal guardian or by a court. Income from a supplemental needs trust cannot be paid directly to a beneficiary, but can be used to purchase good and services on their behalf.
If you think a supplemental needs trust may be appropriate for you or your loved one, call the Heritage Law Center for a free discussion of your options.