Supplemental Needs Trusts

Supplemental-needs trusts are widely used planning tools for persons with disabilities. Such trusts, also referred to as special-needs trusts, are intended to enhance the lives of disabled individuals without jeopardizing their eligibility for Medicaid and Supplemental Security Income (SSI).

Supplemental-needs trusts pay for the personal needs of beneficiaries, including both necessities and luxuries. The trust may include cash, stocks, bonds, and a house, a condominium, or a cooperative residence. The following examples illustrate situations in which a supplemental-needs trust may be used:

  1. A supplemental-needs trust may be established for the benefitof a disabled person under the age of 65, using that person’s own funds, without incurring a penalty period for Medicaid and SSI eligibility. Upon the death of the disabled beneficiary, the State has a right to recover against the remaining funds in the trust for whatever Medicaid charges were incurred by the individual. The law provides, however, that there are no limits on the amount of trust income or principal that may be spent on behalf of the beneficiary during her lifetime.

  2. A parent, family member, or friend may establish a supplemental-needs trust for a disabled person without risking the beneficiary’s eligibility for public benefits. In such a case, Medicaid has no right to recover against any assets remaining in the trust upon the death of the beneficiary. Such assets may be distributed according to instructions included in the trust agreement by the individual who funded the trust.

  3. A disabled person of any age may transfer his assets to a supplemental-needs trust for the benefit of another disabled person under the age of 65 without disqualifying himself for Medicaid home care or nursing home care.
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