SUPPLEMENTAL NEEDS TRUSTS
Supplemental needs trusts (also known as "special
needs" trusts) are drafted so that the funds will
not be considered to belong to the beneficiary in determining
his or her eligibility for public benefits, such as MassHealth,
Supplemental Security Income (SSI), or public housing.
These trusts are designed not to provide basic support,
but instead to pay for comforts and luxuries that could
not be paid for by public assistance funds, such as education,
recreation, counseling, and medical attention beyond
what is required simply to maintain an individual.
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). But the disabled individual
can often create the trust himself or herself, depending
on the program for which he or she seeks benefits. MassHealth
is the most restrictive program in this regard, making
it difficult for a beneficiary to create a trust for
his or her own benefit. But even MassHealth has a "safe
harbor" allowing for the creation of a supplemental
needs trust with a beneficiary's own money if the trust
meets certain requirements. This is sometimes called
a "(d)(4)(A)" trust, referring the authorizing
statute.
Yes, if it is created and funded by the person seeking
public benefits himself or herself. No, if it is created
and funded by someone else for the benefit of person
receiving or seeking public benefits.
Yes and no. Yes, each public benefits program has restrictions
that must be complied with in order not to jeopardize
the beneficiaries continued eligibility for public benefits.
For instance, the beneficiary would lose a dollar of SSI benefits for every
dollar paid to him or her directly. In addition, payments by the trust
for food, clothing or housing for the beneficiary are considered "in
kind" income and, again, the SSI benefit will be cut one dollar for
every dollar of value of such "in kind" income. Some attorneys
draft the trusts to limit the trustee's discretion to make such payments.
Others do not limit the trustee's discretion, but instead counsel the trustee
on how the trust funds may be spent, permitting more flexibility for unforeseen
events or changes in circumstances in the future. The difference has to
do with philosophy, the situation of the client, and the amount of money
in the trust.
