What are Special Needs Trusts?

If you or your child has qualified for Supplemental Security Income (SSI), but then you receive some money or assets, maybe through inheritance or a personal injury settlement, you could lose the SSI Federal benefit because you are suddenly over the resource limit.  This would result in an overpayment, and Social Security asking for the money back.  Even if you did not know that it would reduce or eliminate your benefit, Social Security can cease future payments and require you to pay back money for any months where you had a right to, or access to, those new resources.

This is particularly troubling to families who want to help and provide for their disabled relatives, but feel like the government is not allowing them.  One way to overcome the resource limit while staying within the spirit and the letter of the law is to set up a Special Needs Trust.

A trust is a legal arrangement that allows one party to hold property for the benefit of another.  Trusts are regulated by state law, and their formation can vary from state to state.  Trusts can contain both liquid assets, like cash, and real or personal property that could be turned into cash.

For an SSI recipient, a particular type of trust must be used in order for it not to be counted as a resource. The trust would need to be established either under Section 1917(d)(4)(A) of the Social Security Act, often called “special needs trusts;” or under Section 1917(d)(4)(C) of the Social Security Act, often called “pooled trusts.”

In order to qualify as a (d)(4)(A), Special Needs Trust, the trust be irrevocable and be established by a parent, grandparent, legal guardian or court.  Also the trust must specifically direct that the State receive all amounts remaining in the trust on the death of the SSI beneficiary up to the amount equal to the total assistance paid on behalf of the individual. This means the assets of the trust would be used to pay back the State for benefits.  If there is any money remaining it would go back to the person who created the trust, or be paid out as the directed by the trust.  Although you could set up a trust on your own, this is not recommended.  Instead, please consult with an experienced Trusts and Estates law attorney in your state who has practiced in the area of Special Needs Trusts.

The money in a special needs trust may still be counted as a resource if it is paid directly to the person receiving Federal SSI benefits, or if it is used to pay someone else to provide food or shelter. But, if it is used for other things, like education, medical care, telephone bills or clothing it is not usually counted against the SSI benefit.  The best way to avoid an overpayment situation is to ask an experienced firm like Match and Farnsworth, P.C., to guide you through the process. Match and Farnsworth, P.C., works exclusively in Social Security Disability law, and can answer your questions and help you with the process of setting up a Special Needs Trust or connecting you with an attorney qualified to set one up in your state.
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