In many families, parents decide to leave their property and money to their children.
However, for individuals living with disabilities, leaving property or money to them could cause them to lose eligibility for government benefits.
Often, a person with special needs will be eligible for monthly Supplemental Security Income (SSI) and Medicaid health coverage. Those benefits make a crucial difference for many, specifically for those who require caregiving services in the home.
To provide extra support, the Omnibus Budget Reconciliation Act of 1993 gave authority for the use of a Special Needs Trust. Specifically, 42 U.S.C. 1396p (d)(4)(A) and (d)(4)(C) state that a Special Needs Trust (SNT) can preserve a person’s financial eligibility for Medicaid and SSI regardless of the amount and provide additional funds. However, the trust must be managed by a trustee.
The most common situation in which a special needs person sets up a SNT occurs when the individual is to receive money or property from an accident settlement, inheritance or other source.
To serve the same purpose, a Third Party Special Needs Trust can be created and funded by a parent, grandparent or guardian during their lifetime or through a will. Please note that certain requirements apply for a Third-Party trust to be funded through the use of a will.
Specific investment rules apply to the trusts formed under (d)(4)(C) so that assets from multiple individuals can be “pooled” or linked to reduce the overall cost of managing the accounts.
While most providers do not require a minimum funding amount for a pooled trust, if the amount is less than $25,000, it may be better to seek out alternatives such as an ABLE account or work with an attorney on a spend down strategy.
Funds in the pooled trust will be invested by professionals. Amounts from the SNT will be paid out to cover specific types of expenses on behalf of the special needs individual over time.
Additionally, SNT providers are required to comply with prudent investment rules. It is important to ask the provider what their rate of return is because it can vary greatly.
There are nonprofit organizations which operate pooled trusts to support special needs persons. Their staff will handle the creation, fund management, appropriate expense disbursement, and required reporting processes.
To locate organizations whose staff has this expertise, an Internet search is appropriate. The search terms of West Virginia pooled trust will bring up a listing of organizations in this field. Also, contact information for nonprofits in this field can be found at https://specialneedsanswers.com/pooled-trust.
There are a variety of important issues to assess and consider when looking into providers. Here’s a list of some examples:
Do they commingle assets for operational purposes, or will you have your own individual account?
How do you view your balance and status of disbursement requests?
What are the fees? Are there any hidden fees (i.e., per disbursement, restrictions on how much can be spent, asset management fees, trust administration fees, etc.)?
How quickly do they process disbursement requests? What protocol do they use to approve them (i.e., a board, multi-stage process, or one person)?
Can you move to other states and remain in the program?
Do they offer the use of Secured Debit Cards which provide direct access to your account?
Are your funds insured?
What are their returns on investment over the past year? Be sure to request this in writing.
On this or other issues, West Virginia Senior Legal Aid can help state residents, age 60 and over, with their legal questions. Call the toll-free line at 800-229-5068. Client confidentiality rules require that the affected person make the call.