Supplemental needs trusts

Disabled individuals often need assistance and supervision to meet their daily living needs. This assistance may take many forms. A disabled individual may need 40 hours a week of assistance from an aide; or need coverage to pay for extensive and ongoing medical bills, or need a monthly stream of income because he cannot work. Government programs are the safety net for most of our country’s severely disabled. Individuals who are poor enough and sick enough to meet certain criteria may be eligible to receive public assistance, that over a lifetime can result in millions of dollars of assistance for that individual.

If a disabled individual directly receives assets in any way, this can profoundly affect that individual’s eligibility for public benefits. If a disabled person directly receives an inheritance, or receives a lifetime gift, or receives the proceeds of a personal injury settlement, that individual may lose all of his public benefits. He may no longer be seen as impoverished and hence no longer meet the eligibility criteria for the public benefits. What at first may seem like a cause for rejoicing may in fact wreak havoc on the delicate balance of public benefits that holds together the life of the disabled.

The Supplemental Needs Trust is a device for setting aside funds for disabled individuals. Essentially, with a Supplemental Needs Trust the funds are seen as owned by the trust and not by the disabled individual. Thus, the disabled individual is still poor enough to qualify for public benefits. Without Supplemental Needs Trusts, the disabled individual would always have to live in poverty and would never be able to afford any luxuries.

With the enactment of the Omnibus Reconciliation Act of 1993 (OBRA-93), these trusts have become an essential part of any estate plan or personal injury settlement for a disabled individual. They may be set up by a third party, such as a parent, as a way to make a gift to a disabled child, or they may be set up with the funds of the disabled person, for example, to receive the funds of a personal injury settlement. Each form of trust must be set up and structured in a different way. Carlin & Shapiro can assist you in the preparation of a Supplemental Needs Trust that fulfills your specific needs.