John’s grandfather had always wanted to financially help his special needs grandson. He thought he was doing the right thing by leaving a lump sum of money, to his grandson, in his will. Yet, circumstances would prove him wrong.

John was surprised when he received an inheritance from his deceased grandfather, totaling $100,000.  For most people, this would have been a wonderful and exciting gift, yet for John, it was not.  John was living with special needs.  He received government benefits for his healthcare needs, therapies, food, and shelter.  If John accepted the inheritance, he would lose his government benefits. John had a dilemma – keep his inheritance and lose his benefits or renounce his inheritance and continue his benefits. 

John renounced the inheritance his grandfather had given him, so he could keep his government benefits. He was not able to use any of the money his grandfather had wanted him to have. There was a legal way for John to have kept his inheritance and his government benefits.  By law, John’s grandfather could have established a third party supplemental needs trust and had the $100,000 directly deposited into this trust, for John’s benefit.

When a person is considering how to provide financial support for a family member, it is important for the person to give thoughtful attention to these issues:

  • What financial support will my special needs loved one require while I am alive and when I am no longer here?
  • Will my special needs loved one be able to enjoy the same quality of life that is now being lived?
  • Who will administer the third party supplemental needs trust and ensure that the funds are managed for the benefit of my loved one?
  • How can I ensure that Supplemental Security Income (SSI) and Medicaid benefits will not be jeopardized for my special needs loved one?

People establish third-party supplemental needs trusts for many reasons. The foremost purpose is to ensure that special-needs individuals will be taken care of through the use of government benefits and the monetary gifts deposited into the trust. For example, a grandparent or parent who has a special needs family member may establish a third-party supplemental needs trust so that the individual will have access to money even if the grandparent or parent were to die. Rather than simply giving the individual the money, the parent deposits the money in a third party supplemental needs trust where these monetary gifts can be monitored and overseen by a professional trustee.

A second reason people establish a third-party supplemental needs trust is to avoid complications with government benefits received from the state. If someone gives assets to the special needs individual outright, Medicaid may determine the individual’s net worth is too high and no longer eligible for the needed government benefits. There is no limit to the size of the trust fund and the funds can be used for almost anything a person with special needs requires to supplement his or her government benefits. Money deposited in a third-party supplemental needs trust is exempt from being counted as an asset for the special needs individual.

Upon the death of the person with special needs, the assets in a third-party supplemental needs trust can pass to other relatives or another chosen recipient. This type of trust can help to ensure the special needs individual remains eligible for all appropriate benefits.

If you have a relative living with special needs, consider a third party supplemental needs trust for your monetary gifts to this person.  It truly can make a world of difference to the person living with special needs.

*Darlene A. Kemp, MPH, MBA-HCM, Executive Director, Vista Points Special Needs Trusts & Resource Center.  – 615-758-4660

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