Sherman Oaks, CA

What Is a Supplemental Needs Trust?

The Law Office of Rodney Gould tells us what exactly is a supplemental trust.

If you have a family member or loved one with special needs requiring lifelong care and support, you may want to consider establishing a supplemental needs trust. The beneficiary of a supplemental needs trust will allow you to provide your loved one with financial assistance without putting them at risk of losing critical public benefits. The fact that this type of trust can provide income to cover the needs of a loved one that is not addressed by other public benefits is a huge benefit. Think about whether or not establishing a supplemental needs trust may be right for you and your loved ones. 

What Is a Supplemental Needs Trust?

A supplemental needs trust is also sometimes referred to as a special needs trust. There are different ways that this type of trust can be established. A third party supplemental needs trust, for instance, is one that is funded with the money from a family member or friend for the benefit of the beneficiary. A self-settled supplemental needs trust is one that is funded by the beneficiary himself or herself. The beneficiary may use something like an inheritance or the proceeds of a court settlement to fund the trust for his or her benefit. While the trust will be funded by him or her, someone else will still be the trustee and charged with managing the trust. One of the key differences between a self-settled supplemental needs trust and a third party supplemental needs trust is what happens to any funds that remain in the trust once the beneficiary has passed away. Any remaining funds in a self-settled supplemental needs trust will be used to pay back Medicaid. This payback is not required if it was a third-party supplemental needs trust.

The main benefit of a supplemental needs trust is that the trustee manages funds for the benefit of the special needs beneficiary without threatening the beneficiary’s continued receipt of government benefits such as Supplemental Security Income and Medicaid. These types of government benefits are need-based and a person must have assets that fall below a certain valuation level to qualify. The assets held in a supplemental needs trust are not used in calculating these public benefits. This is not only because the beneficiary has no control over the distributions made by the trust, but also because the distributions from the trust are only to go towards such supplemental needs and life-enhancing expenses that are not provided for by the government benefits. That is why the trust is referred to as “supplemental needs.” The trust funds are not meant to replace government benefits but are used to supplement them.

Developing a Dependable Estate Plan with a Sherman Oaks Estate Planning Attorney

The last thing you want to do is to try and help provide for a special needs loved one while putting them at risk of losing government benefits. A supplemental needs trust is a valuable tool that can help you escape this potential situation. For all of your estate planning needs, The Law Offices of Rodney Gould is here to maximize benefits and protect the best interests of you and those you care about. Contact us today.

Posted in: Estate Planning