Trusts

The Problem: How to Assure Financial Security for Individuals with Disabilities

Benefits, such as SSI and Medicaid, are critical resources for many individuals with disabilities. These benefit programs, while essential, are often insufficient to meet basic needs for living. In order to be eligibile for these programs individuals must meet very restrictive income and resource limitations.

Families often supplement the benefit income received by their family member who has a disability. Family members worry about the future when they will no longer be able to provide such supplemental income.

In many situations, a special needs trust is the best solution. SSI and Medicaid regulations allow recipients to have assets held in special needs trusts. Assets held in a properly structured and administered special needs trust will not negatively affect eligibility for benefits. Although the individual with a disability can have no control over or direct access to the special needs trust, distributions can be made to supplement benefit income as necessary to meet living and health care needs.

The Solution

The legal documents for a special needs trust may be drawn up by an attorney and administered through any trust company. The terms and conditions of the trust must contain language that specifies the funds are available only to supplement, not supplant benefits to which the beneficiary is entitled. However, a special needs trust established and administered through MSNT has some advantages over a trust company that administers all types of trusts.

• MSNT is a non-profit organization established by statute (402.199 – 402.220 RSMo) in the state of Missouri for the purpose of administering special needs trusts. Special needs trusts are the only type of trust accepted by MSNT.
  
• MSNT staff keep abreast of SSI and Medicaid regulations and are required by statute not to make distributions that negatively affect the benefits of the beneficiary.
  
• MSNT is committed to making trust services accessible to low and moderate income individuals and families.

Eligibility

Any individual who meets the following definition is eligible to establish a special needs trust with MSNT:

• Individual has a mental or physical impairment that substantially limits one or more major life activities, whether the impairment is congential or acquired by accident, injury or disease, and where the impairment is verified by medical findings.

Funding a Special Needs Trust

Special needs trusts may be established with the disabled individual’s own funds (first-party trust) or with funds provided by parents or relatives (third-party trust). Typical sources of funds for special needs trusts are:

• Gifts from family, friends, relatives.
• Proceeds of personal injury settlements.
• Proceeds of a life insurance policy.
• Funds or other assets from an inheritance.
• Back-payments in benefits.

Special needs trusts established with the disabled individual’s own resources must contain a Medicaid pay-back clause (See First Party Special Needs Trusts, Pooled Medicaid Payback Trusts).

How Funds in a Special Needs Trust Can be Used

Limitations on the use of funds in a special needs trust are a function both of the terms and conditions of the trust itself and the regulations of the benefit programs in which the beneficiary is enrolled. The funds of a special needs trust may be used only to supplement income from benefits. Within these parameters, special needs trust funds may be used for:

• Medical and dental care not paid by other sources.
• Private rehabilitation training, services or devices.
• Supplementary education assistance.
• Entertainment and hobbies.
• Transportation.
• Personal property and services.

All distributions from the special needs trust must be for the direct benefit of the beneficiary. Funds in a special needs trust are managed and controlled by a trustee. In the case of special needs trust with MSNT, the person named by the donor and the MSNT Board of Trustees are co-trustees. Co-trustee have the responsibility to determine the needs of the beneficiary and to manage the use of trust funds.

How to Establish a Special Needs Trust

Two basic steps must be competed to create a special needs trust. The first step is to complete the legal documents required to establish the trust. These documents are generally completed by an attorney. The documents identify the person for whom the trust is established (beneficiary), the person(s) who are providing the funds for the trust (donor), and the person(s) who will manage the trust (trustee). Other terms and conditions of the trust are also set forth in detail. The second step is to establish a trust account and deposit funds to the trust.

Setting up a special needs trust with MSNT is a simple process.

• MSNT provides the necessary documents to establish a special needs trust. The Terms and Conditions are designed to meet the requirements of SSI and Medicaid for special needs trusts. A standardized form for a Trust Agreement is provided.
• MSNT strongly encourages persons interested in setting up a trust to have an attorney assist in completing the documents. MSNT staff are available for consultation as well.
• MSNT requires a minimum opening deposit of $500, plus an enrollment fee to establish an active trust account. If the special needs trust is to be funded at a later date, MSNT will establish an inactive trust with a deposit of $100. The $100 is held in a general account until the balance reaches $500 and the enrollment fee is paid.

Note: The establishment of a special needs trust does not take the place of a will. If assets are to be placed into the trust at the death of the donor, a mechanism must be in place to direct the distribution of the asset into the trust for the benefit of the individual with a disability. In general, a will is the legal document wherein the donor spells out how the funds are to be distributed to the special needs trust.

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