Third-Party Special Needs Trust

Providing for a disabled child.

Sometimes parents will raise a developmentlly disabled child and continue to care for the child into adulthood. If one of the parents develops a chronic-health problem, the parent may not have the resources to care for the disabled child and to provide for his or her own needs. In such a case, the parent will frequently turn to Medicaid to help pay for care. This raises the question of how does the parent qualify for Medicaid and still provide for the disabled child?

The answer is for the parent to set up a Special-Needs Trust (SNT) for the child. A transfer of assets into a SNT for a disabled child is an allowable transfer under Medicaid rules. By making the transfer, the parent’s assets can be reduced below $2,000.00, thereby, meeting Medicaid’s asset elibility requirements.

What if the child is receiving Medicaid? Does transfering assets into a SNT make the child ineligilbe for government benefits? A third-party SNT is established with the assets of someone other than the disabled child. Therefore, if the trust is set up and administered properly, it is used to supplement not supplant public benefits. The resources available in the trust can be used to improve the quality of life of the disabled child. Once the trust is created and funded by the trustmaker, other relatives of the disabled child, for example the child’s sibliings, can direct assets to the trust. Finally, the parent can choose who the assets in the trust will go to when the disabled child passes away.

With proper planning, a parent with a chronic-health problem can qualify for Medicaid and still provide for a disabled child without disqualifing the child from government benefits.

Tom Packer is an Elder Law Attorney serving all of Southeast Idaho. As part of his law practice, Tom offers Life Care Planning to deal with the challenges created by long-term illness, disability and incapacity. If you have a question about a senior’s legal, financial or healthcare needs, please call us.