Special Needs Trust

I recently helped a client, a dear woman I will call Martha, set up a Special Needs Trust because her mother had passed away. Had Martha received her inheritance outright, it would have disqualified her from continued social security assistance. Martha’s disability restricts her from working even a part-time job and is her only source of income. Martha’s inheritance may have supported her for a couple years, however, without the continued social security assistance she would have been unable to survive after the inheritance was exhausted.

A growing number of people are struggling to make ends meet with social security payments as their only source of income. Often, there are family members who would like to help out but any monies they give can disqualify the family member from social security assistance because of the bare-minimum $2,000 rule. This is complicated further when many of these social security recipients have a disability and are in special need of some extra help. That extra help – of course – is difficult for relatives or friends to offer so long as that $2,000 rule hangs over their heads.

To be fair, the $2,000 rule exists to stop abuse of the system and there is little question but that it does a good job of filtering out less-than-needful-folks from living off government assistance – and therefore it saves you and me from forking out more taxes come April 15th each year. However, in some cases, the limitations of social security income cause significant hardship to SSI or SSDI recipients and the solution is not very well advertised.

Here is what I did for Martha. I reached out to her siblings assigned by her mother to be the successor trustees of her mother’s trust. We reviewed the mother’s trust documents together to make sure the trustees were allowed to make distributions to beneficiaries in trust. Many trusts do not have special needs provisions and require distributions to be made to beneficiaries outright. Fortunately, the mother’s trust was written in a way that allowed me to set up a Special Needs Trust for Martha. Now Martha can still receive her social security assistance and use her inheritance to cover certain medical expenses and enjoy a higher quality of life.

If you or a loved one struggles to have their needs met because of these limitations, a Special Needs Trust may be the perfect vehicle for you to help them enjoy a better standard of living and to live a fuller life.

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