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Using a Special Needs Trust for Medicaid Recipients

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Using a Special Needs Trust for Medicaid Recipients

Written by Charles Newland on . Posted in Probate and Estate Planning

disabled person in a wheelchair, special needs trust attorneySpecial needs trusts are designed to provide funds or other assets that benefit the disabled individual who is receiving Medicaid or SSI benefits without jeopardizing the recipient’s income eligibility. Often referred to as supplemental needs trusts, they can be used to provide services and amenities to recipients that improve their quality of life. Since public benefits programs are highly restrictive, it is vital that the guidelines for establishing and using a special purpose trust be carefully followed. A special needs trust attorney can help establish a trust in compliance with state law.

How a Special Needs Trust Works

In Illinois, a disabled person’s annual income may not exceed $15,880 to qualify for Medicaid. For a family of four, the limit is $32,319. Low-income and disabled individuals who have income exceeding these limits are not eligible for benefits.

A special needs trust can provide for a disabled person’s supplemental needs, however, while still enabling him or her to retain eligibility. There are two basic types of special needs trusts.

First Party Trust

A first-party trust holds an individual’s personal assets. As long as the special needs trust is properly established, these assets do not prohibit the individual from qualifying for Medicaid and SSI benefits. To qualify for a first-party trust, a number of requirements must be met and specific guidelines for the use of the resources must be followed.

Third Party Trust

In a third-party trust, the assets held come from a source other than the disabled individual. These could be gifts and donations from relatives or friends. The use of third-party trust funds is not as strictly regulated as it is with first-party trusts.

How Can Trust Funds be Used?

Special needs trust funds can be used to enhance the care received by the disabled person. For example, they may pay for additional home care, therapy, or equipment that would be beneficial. In some cases, they can even be used to cover the cost of a needed vacation for the disabled individual and a caregiver.

Follow the Rules

Illinois, like other states, has its own rules governing special needs trusts. It is essential that the trusts comply with state law to be effective. A special needs trust attorney can help set up the trust in compliance with applicable regulations so that the individual’s assets are protected and do not prohibit the disabled person from qualifying for necessary Medicaid or SSI benefits.

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