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The Benefits of a Special Needs Trust

The Law Offices of Steven H. Peck, Ltd. June 27, 2023

If you have a loved one with special needs who requires the services of Medicaid or Supplemental Security Income (SSI), there are asset and income thresholds that have to be observed to qualify. Generally speaking, an individual cannot have more than $2,000 in non-exempt assets, a couple $3,000. Exempt assets are fairly generous, however, and they include a primary home, a vehicle, life insurance, and burial/funeral benefits. Income is also capped at $2,742 a month in 2023.

Special needs trusts are a way for the individual or family and loved one to match the asset and income thresholds, while also providing for services and living expenses not covered by Medicaid or SSI. There are basically three types of special needs trusts that can be employed to supplement government benefits while not disqualifying the person in need of those services.

If you have a child or a loved one in need of Medicaid or SSI in Cook County or Lake County, Illinois, and want to set up a special needs trust, contact The Law Offices of Steven H. Peck, Ltd.

Steven H. Peck will analyze your situation and guide you through the creation of the appropriate type of special needs trust. He also proudly serves clients in the counties of DuPage and McHenry. 

What Is a Special Needs Trust?

A special needs trust provides supplemental services for someone who needs governmental benefits such as Medicaid. It can pay for things that are not covered by the government while not jeopardizing the individual’s qualification for the program. A special needs trust can pay for, among other things: 

  • medical costs not covered by Medicaid, including dental care and special therapies

  • service animals and some assistive technology expenses 

  • computers, phones, and other personal communication devices 

  • trips and other recreational activities 

  • car insurance  

Types of Special Needs Trusts

There are basically three types of special needs trusts that can be employed to help an individual while retaining their qualification for public benefits. The first is called a self-settled, or first-party, trust. The others are third-party trusts and pooled trusts. 

A self-settled trust can be used when the individual in need has received an inheritance or an insurance settlement. The beneficiary is, therefore, the owner or trustee of the trust. As opposed to other types of trusts, however, Medicaid and the government can attach the trust when the individual passes away to pay back for the benefits provided. A first-party trust cannot name outside beneficiaries. 

A third-party trust can be set up by family, friends, or really anyone to benefit the individual with special needs. With this type of trust, because the beneficiary is not the trustee, the funds remaining after the individual’s death can transfer to named beneficiaries without the government’s ability to seize the funds. The remaining funds can return to those who contributed or can be given to a charity. 

A pooled trust is one that is managed by a nonprofit organization. Family or others can contribute funds to the account, and the organization overseeing everything will distribute the pooled assets by the percentage of contributions being made. The fees are typically lower than that for an individual trust and may not require as much money to open an account.  

What Is an ABLE Account?

Another option is to open an ABLE account, which was created in 2014 by the Achieving a Better Life Act. Establishing an ABLE savings account will not affect a beneficiary’s eligibility for government programs such as Medicaid and SSI. Family and friends can contribute, and the funds can be used to supplement what the beneficiary receives from government benefits. 

The law states that “secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, Medicaid, SSI, the beneficiary’s employment and other sources.” 

The only catch here, so to speak, is that the beneficiary must be before the age of 46 by 01/01/2026, which was actually raised from the age of 26 by the ABLE Age Adjustment Act as part of the Omnibus Spending Bill of 2022. The adjustment expands the eligibility to nearly six million persons, including one million veterans. 

Who Would Benefit From a Special Needs Trust?

If you have a child or a loved one who needs government benefits to provide for their health and well-being, then a special needs trust will help keep them under the government income and asset thresholds for qualification. Of course, a special needs trust can also be beneficial if you yourself are the recipient of government programs. 

Turn to Steven H. Peck for Assistance

If you or a loved one is in need of government assistance and seeking asset and income qualification standards through a special needs trust—which will also provide supplemental benefits—reach out immediately to The Law Offices of Steven H. Peck, Ltd. 

Steven H. Peck has helped many others establish special needs trusts and can help you as well, wherever you are in Cook County, Lake County, McHenry County, or DuPage County. Your initial consultation is free.