Individuals with disabilities often rely on federal and state government programs such as Medicaid and Supplemental Security Income (SSI) to help with their financial needs. These programs provide cash benefits as well as coverage for necessary medical and long-term care services. In order to qualify for these programs, very strict income and asset requirements must be met. With certain exceptions, a person is allowed to have only $2,000 in assets in his or her name to qualify. If you have a child who is either currently receiving benefits due to a disability, or will need such assistance in the future, you must be aware of these asset limitations when creating your estate plan to ensure that the child’s eligibility for benefits is not jeopardized.

If you leave a portion of your estate outright to a beneficiary receiving Medicaid or SSI, you run the risk of reducing the amount of benefits, or disqualifying the beneficiary altogether. However, by using a trust known as a special needs trust (SNT), you can provide for a disabled beneficiary while preserving eligibility for government benefits. Under the terms of the SNT, trust assets are held for the beneficiary and used to pay for expenses that are not covered by Medicaid and SSI. Therefore, while the government benefits continue to cover basic needs such as food, shelter, and clothing, the trust assets are available for costs above and beyond the basics such as vacations, educational programs, and other entertainment. As long as payments are never distributed directly to the beneficiary, and funds are not used in such a way as to duplicate the government benefits, then the availability of trust assets will not affect the beneficiary’s eligibility.