Special Needs Trust (SNT)
A Special Needs Trust (SNT) is the only instrument the IRS offers through which you can save for your Special Needs child or adult without disqualifying them from Medicaid benefits.
This important document is State specific and must be written by a qualified Special Needs Attorney. The cost of setting up these trusts is high. A rock-solid SNT may cost in the range of $3,000-5,000, depending upon how complicated and sophisticated the Trust becomes.
Why have I used the term rock solid? An individual who receives Medicaid from the government may not exceed owning assets of $2,000.
With a SNT, your savings dollars can be used for most expenses as long as the item/service is owned and paid for by the Trust. Again, the Trusts are State Specific and you must carefully follow the rules enacted by your State of residence.
I reside in New Jersey. In my State, the Trust can buy my child a TV, a car, an MP3 player, a house, or a vacation. Again, as long as the item is owned and paid for by the Trust.
But other than the fun things my Trust can supply for my child, there are more critical situations to be saving for.
How may my Special Needs loved one become disqualified from receiving Medicaid?
Aside from your loved one owning more than $2,000 in assets, they can lose their Social Security Disability Income (SSDI) benefits and Medicaid by NOT SHOWING UP FOR LIFE.
To keep SSDI and Medicaid active, the Special Needs person must physically show up at the Social Security Office on a periodic basis along with appropriate documentation proving that they still belong in the SSDI and Medicaid system. Other arrangements may be made through your Social Worker if the individual receiving benefits is hospitalized or in a long term care facility. Many disabilities are quite apparent and easily documented. Other disabilities are more difficult to document. Let's use the Mentally Ill as an example.
For the Mentally Ill to qualify and re-qualify for SSDI and Medicaid, they must show proof of continuum of care. They must be under the professional care of a Psychiatrist and remain medication compliant.
Should any of the handicapped not re-apply for benefits at the appropriate time, they can be dropped from the SSDI/Medicaid rolls.
For "apparent" handicaps, re-qualifying is generally a lot of paperwork, yet is relatively simple. When the Mentally Ill do not take the time to re-qualify, it may take them years to re-qualify - if indeed, they ever do. This is called SLIPPING THROUGH THE CRACKS. It is an especially slippery slope for the Mentally Ill, as on the face of it, they look as "normal as you and me." Therefore, this Community has the burden of proof that they continue to be under Psychiatric care.
This is called SLIPPING THROUGH THE CRACKS. This is an especially slippery slope for the Mentally Ill, because on the face of it, they look as “normal as you and I.” Therefore this Community has the burden of proof that they have remained under Psychiatric care.
Sadly, many of the Mentally Ill suffer from the "Wellness Syndrome." The thinking is, "I feel well, so I must be well. Therefore, I don't need these medications anymore nor do I need a Psychiatrist either." Thus, "Active" Mental Illness returns and it becomes very difficult to reason with an adult in the full-blown state of Mental Illness that they must return to the Psychiatrist, go back on the medications, and must go back to Social Security…they must show up for life.
An important consideration in setting up a Special Needs Trust is that a family and their friends can "patch the cracks" and provide additional items/services for their loved one. There are benefits to be reaped in all SNC's, because there are "cracks" all over the system in terms of what you may wish for your loved one and what is budgeted for by the government. Your SNT can provide the following:
Get a second Doctor’s opinion, who will consult with your Medicaid doctor.
- Pay for the Psychiatrist.
- Buy the medication.
- Provide for living quarters.
- Provide a home health aid.
- Buy that high end wheelchair or retrofit a car so that your loved one has the best mobility possible.
- Go to the Dentist of your choice.
- Ad infinitum.
Remember that Medicaid is a Government program that insures the uninsurable. Generally, once your child turns 18, or drops out of school, you can no longer insure them through your employer's insurance plan. Due to their pre-existing condition, you also may not be able to insure them through ANY insurance carrier.
Setting up an SNT and saving for the future of our Special Need's child or adult will give us care-givers some measure of comfort.
Here are some other valuable resources for your journey:
Finding More Funding for your Child's Special Needs Trust
Exceptional Parent Magazine
Donna LaMuraglia
Director of Special Needs Services
