Suppose you’d like to financially support a family member who is physically or mentally disabled but want to make sure he/she can still receive federal benefits like Social Security Disability Income (SSDI) or Supplemental Security Income (SSI). In that case, a special needs trust is a must.
Mississippi has specific rules and statutes that dictate a special needs trust (SNT) and are essential to understand before creating one.
How A Special Needs Trust Works
This type of trust covers the percentage of the beneficiary’s needs not covered by government assistance payments. The trust’s assets typically do not count for public assistance qualification and proceeds can be allocated for medical expenses and caretaker costs among other qualified expenses.
Whoever creates the trust can designate a trustee to oversee it and assets provided by third parties (like parents) are not subject to Medicaid’s repayment rules.
As an additional note, these trusts can’t be accessed by winners of a lawsuit or creditors.
Mississippi Special Needs Trust Specifics
Mississippi’s Medicaid policy notes the following:
“To qualify for an exception to the rules governing trusts in this section, the Special Needs Trust must contain a provision stating that, upon the death of the individual, or upon termination of the trust for any other reason, the MS Division of Medicaid receives all amounts remaining in the trust, up to an amount equal to the total amount of medical assistance paid on behalf of the individual.”
This means that whenever the individual named in the trust dies, the MS Medicaid Division can receive a portion of the trust’s value that would allow the trust to qualify for an exception from the other rules governing SNTs.
Additionally, when an SNT is established for a disabled individual under age 65, certain trust exceptions continue even past age 65. However, once said individual reaches age 65, they cannot be added to the trust or have it amended in any way. In the same MS policy, “any such addition or augmentation after age 65 involves assets that were not the assets of an individual under 65 and therefore, those assets are not subject to the exemption discussed in this section.”
There are additional exceptions for pooled trusts and other select special needs instruments, and it is vital to consult a qualified estate planning attorney to ensure everything is set up correctly.
Benefits and Drawbacks of a Special Needs Trust
Perhaps the biggest stipulation – which could be a benefit or drawback depending on your perspective – is that money and assets put into this trust are used for very specific purposes. As the name states, disbursements are intended to go towards the care of the disabled individual and must be created before the individual turns 65.
If the disabled person needs long-term or sustained care, a special needs trust is a great way to ensure that resources will be available for a predetermined amount of time to sustain that person’s wellbeing.
Variations on Special Needs Trusts
These trusts come in two forms: third-party and first-party. The former is the most commonly used when planning in advance for an individual’s special needs. The latter is better used for an individual who inherits or receives money or property or receives a court settlement. A trust can be created even if the person isn’t disabled yet and could be structured for future potential disabilities that arise.
If you’re looking to take care of and plan for the wellbeing of a disabled relative or loved one, a special needs trust is an excellent vehicle to set aside resources for their future. Call the estate planning team at The Law Offices of Rusty Williard today at (601) 824-9797 to learn more about how we’ve helped Jackson and Brandon families plan for their futures.