Social Security Benefits and Special Needs Trusts

For those who provide care for a loved one with special needs, a major concern is protecting your loved one’s Social Security benefits.  For instance, if someone getting Social Security Income (SSI) receives a substantial inheritance, that income may jeopardize his or her eligibility for SSI.  However, a proper estate plan that includes a special needs trust, can be invaluable in protecting your loved one’s government benefits.   So, if you have questions about social security benefits and special needs trusts, contact an Arkansas special needs planning attorney.

The Definition of Special Needs Trust

A trust is simply a legal instrument that provides very specific instructions for distributing and managing certain property for a named beneficiary.  A trust is used to protect property, reduce estate taxes and avoid probate proceedings, if possible.  A special needs trust is a special type of trust, used solely for the benefit of a person with special needs.  Since, special needs trusts are usually irrevocable (cannot be canceled), the property placed in that type of trust will not be subject to creditors or lawsuits. A special needs trust can ensure that the needs of your loved one will be taken care of, even when his or her caregiver is no longer available to manage the care.

Types of Special Needs Trusts

Special Needs Trusts are drafted in two different ways.  A general support special needs trust is meant to be the primary source of benefits for the disabled.  Whereas, a supplemental care special needs trust is only the secondary source of income, once government benefits have been exhausted.  The downside to creating a general support special needs trust is that the trust assets may cause the beneficiary to become ineligible for Social Security Income.  However, a Supplemental Care Special Needs Trust will typically preserve eligibility for benefits.

SSI Eligibility and Special Needs Trusts

Social Security agencies must assess an individual’s financial resources in order to determine eligibility for needs-based government benefits.  If your loved one has more than $2,000 of “countable resources” each month, he or she may not be eligible for SSI.  The resource limit is $3,000, if that person is married.  Any source of income, such as an inheritance or settlement, may result in the individual exceeding these limits, which would then threaten his or her eligibility for social security income.

Income is anything your loved one has received during a calendar month that can be used to meet his or her needs for food or shelter. Income includes not only cash, but in-kind income, such as food or shelter.  “Countable” income is the amount left after any applicable exclusions are considered.  The Social Security Administration has an explanation of possible exclusions.

Whether possible benefits may include Supplemental Security Income, Social Security Disability, Medicare or Medicaid, a special needs trust needs to be drafted with the different eligibility requirements and benefit limitations in mind.

If you have questions regarding Social Security Income, Special Needs Trusts, or any other special needs planning issues, please contact Wilcox Attorneys, PA online or by calling us at (479) 443-0062.