KELLER, BARRETT & HIGGINS

What is a Special Needs Trust and Why Do I Need One in Ohio

A special needs trust (SNT) is a legal arrangement that allows assets to be held in a trust for the benefit of a person with disabilities. The primary purpose of an SNT is to supplement, rather than replace, government benefits such as Supplemental Security Income (SSI) and Medicaid. The funds in a special needs trust can be used for a variety of expenses, including medical care, education, recreation, and personal care items, all without affecting the beneficiary’s eligibility for these critical benefits.

Different Types of Special Needs Trusts

There are three main types of special needs trusts, each serving different purposes and funded in different ways:

First-Party Special Needs Trust: Also known as a self-settled or Medicaid payback trust, this type of trust is funded with the beneficiary’s own assets. This could include inheritance, personal injury settlements, or savings. Upon the beneficiary’s death, any remaining assets in the trust must be used to repay Medicaid for the cost of services provided.
Third-Party Special Needs Trust: This trust is funded by assets belonging to someone other than the beneficiary, typically parents or other family members. It does not require Medicaid payback upon the beneficiary's death, allowing remaining assets to be distributed to other family members or heirs as specified by the trust.
Pooled Special Needs Trust: Managed by a nonprofit organization, this type of trust pools the resources of many beneficiaries for investment purposes. Each beneficiary has a separate account, but the funds are managed collectively. Pooled trusts can be funded with either first-party or third-party assets.

Legal Framework in Ohio

Special needs trusts in Ohio are governed by federal and state laws designed to protect the assets of individuals with disabilities while maintaining their eligibility for government benefits. These laws outline the establishment, management, and usage of funds in special needs trusts.

Key Requirements and Regulations

Several key requirements and regulations govern special needs trusts in Ohio:

Trustee: The trustee is responsible for managing the trust's assets and ensuring they are used in accordance with the trust's terms and applicable laws. Trustees can be family members, friends, professionals, or organizations.
Distributions: Distributions from the trust must be made in a way that does not interfere with the beneficiary’s eligibility for government benefits. For example, direct cash distributions to the beneficiary are typically prohibited, as they can be counted as income and affect benefit eligibility.
Medicaid Payback Provision: For first-party special needs trusts, Ohio law requires that any remaining assets in the trust be used to reimburse Medicaid for services provided to the beneficiary upon their death.
Establishment and Funding: The trust must be established and funded in accordance with federal and state laws. First-party trusts must be established by a parent, grandparent, legal guardian, or court, and funded with the beneficiary’s assets.
Reporting Requirements: Trustees must adhere to reporting requirements, providing regular accounting and documentation to relevant authorities to ensure compliance with the trust’s terms and applicable laws.

Benefits of a Special Needs Trust

Protecting Eligibility for Government Benefits

How a Special Needs Trust Preserves Eligibility for SSI and Medicaid

One of the primary benefits of a special needs trust is that it allows individuals with disabilities to receive financial support without losing their eligibility for Supplemental Security Income (SSI) and Medicaid. These programs have strict asset and income limits, and directly receiving significant assets could disqualify the beneficiary from receiving these benefits.

SSI Eligibility: SSI provides monthly payments to individuals with disabilities who have limited income and resources. By placing assets in a special needs trust, these assets are not counted towards the resource limit for SSI eligibility.
Medicaid Eligibility: Medicaid offers health coverage and long-term care services to individuals with disabilities. Similar to SSI, maintaining eligibility for Medicaid is crucial, and a special needs trust ensures that any additional financial support does not affect this eligibility.

Importance of Maintaining Benefit Eligibility for Individuals with Disabilities

Maintaining eligibility for SSI and Medicaid is critical because these programs provide essential financial assistance and healthcare coverage that many individuals with disabilities rely on. Losing eligibility could lead to significant financial hardship and lack of access to necessary medical care. A special needs trust ensures that individuals with disabilities can continue to receive these benefits while also benefiting from additional financial resources.

Financial Security and Asset Management

How a Special Needs Trust Manages and Protects Assets

A special needs trust is designed to manage and protect assets for the beneficiary’s long-term financial security. The trust holds and disburses funds in a manner that complies with legal requirements and does not affect benefit eligibility.

Asset Protection: The assets in the trust are safeguarded from misuse and potential claims by creditors, ensuring that they are preserved for the beneficiary’s future needs.
Structured Disbursements: Funds from the trust are disbursed according to the trust’s terms, providing financial support for specific needs without violating benefit eligibility rules.

Role of the Trustee in Managing the Trust

The trustee plays a crucial role in managing the special needs trust. Their responsibilities include:

Fiduciary Duty: The trustee has a legal obligation to act in the best interests of the beneficiary, managing the trust’s assets prudently and responsibly.
Disbursement Management: The trustee ensures that funds are used appropriately for the beneficiary’s benefit, paying for items and services that enhance their quality of life while maintaining benefit eligibility.
Compliance: The trustee must comply with all legal requirements and reporting obligations, providing regular accounting and documentation to relevant authorities.

Enhancing Quality of Life

Providing for Additional Needs Not Covered by Government Benefits

A special needs trust can be used to pay for a wide range of expenses that improve the beneficiary’s quality of life but are not covered by government benefits. These can include:

Education: Tuition, tutoring, and educational materials.
Recreation: Hobbies, sports, vacations, and other recreational activities.
Medical Care: Services and equipment not covered by Medicaid, such as dental care, physical therapy, and alternative treatments.

Ensuring Long-Term Care and Support

A special needs trust provides a reliable source of funding for long-term care and support, ensuring that the beneficiary’s needs are met throughout their lifetime. This includes:

Living Expenses: Housing, utilities, and home modifications for accessibility.
Personal Care: Services such as in-home care, transportation, and personal assistance.
Health and Wellness: Ongoing medical care, therapy, and wellness programs that contribute to the beneficiary’s overall well-being.

Setting Up a Special Needs Trust in Ohio

Steps to Establish a Special Needs Trust

Consulting with an Experienced Attorney

The first and most important step in setting up a special needs trust is consulting with an experienced attorney who specializes in estate planning and special needs trusts. An attorney can provide invaluable guidance on the legal requirements and help you navigate the complexities of setting up the trust.

Legal Expertise: An experienced attorney understands the nuances of Ohio laws and federal regulations governing special needs trusts.
Customized Advice: Your attorney can provide advice tailored to your specific situation, ensuring that the trust meets the beneficiary’s unique needs.

Identifying the Type of Trust Needed

Based on the beneficiary’s circumstances and the source of funding, you need to choose the appropriate type of special needs trust:

First-Party Special Needs Trust: Funded with the beneficiary’s own assets (e.g., personal injury settlements, inheritance).
Third-Party Special Needs Trust: Funded with assets from family members or other third parties.
Pooled Special Needs Trust: Managed by a nonprofit organization and funded with either first-party or third-party assets.

Drafting the Trust Document

Once you have identified the type of trust needed, the next step is to draft the trust document. This legal document outlines the terms and conditions of the trust, including how the assets will be managed and distributed.

Legal Requirements: The trust document must comply with Ohio state laws and federal regulations.
Specific Provisions: Include specific provisions regarding the use of funds, the role of the trustee, and the rights of the beneficiary.

Selecting a Trustee

Choosing the right trustee is critical for the effective management of the special needs trust. The trustee’s responsibilities include managing the trust’s assets, making distributions, and ensuring compliance with legal requirements.

Trustworthiness: Select someone who is reliable and trustworthy.
Financial Expertise: The trustee should have the financial acumen to manage the trust’s assets effectively.
Understanding of Beneficiary’s Needs: The trustee should understand the unique needs and circumstances of the beneficiary.

Funding the Trust

Sources of Funds

Funding the special needs trust involves identifying and transferring appropriate assets into the trust. Common sources of funds include:

Inheritance: Family members can leave assets to the trust instead of directly to the beneficiary.
Personal Savings: Parents or other relatives can contribute their savings to the trust.
Life Insurance: Proceeds from a life insurance policy can be directed to the trust.
Settlements: Personal injury settlements can be placed into a first-party special needs trust.

Considerations for Funding the Trust

When funding a special needs trust, several important considerations must be addressed:

Asset Management: Ensure that the assets transferred into the trust are managed to provide long-term financial security for the beneficiary.
Tax Implications: Consult with a financial advisor or tax professional to understand any tax implications associated with funding the trust.
Continued Funding: Consider setting up a plan for ongoing contributions to the trust, such as regular deposits from family members or periodic funding from other sources.

Contact Keller, Barrett & Higgins for a Consultation

Setting up a special needs trust is a critical step in ensuring the long-term financial security and quality of life for your loved one with disabilities. The experienced attorneys at Keller, Barrett & Higgins are here to guide you through every step of the process. Our commitment to providing personalized and comprehensive legal services ensures that your special needs trust is tailored to meet the unique needs of your family.

Take the first step towards securing your loved one's future by contacting Keller, Barrett & Higgins today. Our knowledgeable attorneys are ready to assist you in setting up a special needs trust that protects your loved one’s benefits and enhances their quality of life.

How to Reach Us

Phone: (513) 351-6058
Email: info@kbhlawyers.com
Website: Keller, Barrett & Higgins