While you can certainly bequest money and assets to those with special needs, such a bequest may prevent them from qualifying for essential benefits under Supplemental Security Income (SSI), Medicaid programs, or other public benefits. However, public monetary benefits provide only for the bare necessities such as food, housing and clothing. As you can imagine, these limited benefits will not provide those loved ones with the resources that would allow them to enjoy a richer quality of life. But if parents leave any assets to their child who is receiving public benefits, they run the risk of disqualifying the child from receiving them. Fortunately, the government has established rules allowing assets to be held in trust, called a "Special Needs" or "Supplemental Needs" Trust for the benefit of a recipient of SSI and Medicaid, as long as certain requirements are met.
Generally, a Special Needs Trust should be established no later than the beneficiary's 65th birthday. If you have a disabled or chronically ill beneficiary, you may want to consider establishing the Special Needs Trust at an early age. One benefit of having the Trust in place is that if the disabled beneficiary becomes the recipient of funds such as gifts, bequests, or a settlement from a lawsuit, those funds can immediately be transferred to the Special Needs Trust without affecting that individual's eligibility for government benefits.
While Special Needs Trusts are typically established by parents for their disabled children, any third party can establish a Special Needs Trust for the benefit of a disabled beneficiary. It is important to seek the assistance of competent attorney when creating a Special Needs Trust. Indeed, a poorly drafted Trust can easily be subject to "invasion" by the government agencies who are providing the benefits.
Yes, you should still establish a Special Needs Trust to protect your disabled beneficiaries from potential creditors. For example, if your disabled beneficiaries are ever sued in a personal injury action, the assets in the trust would not be available to the plaintiffs. Furthermore, because the funds in the Special Needs Trust are not countable as available assets for purposes of determining government benefit eligibility, more of your money can be used for those supplemental expenditures that will allow your disabled beneficiary to enjoy a higher quality of life. Otherwise, much of your assets will be used to pay for private care benefits that are extremely expensive and can drain even significant sums of money over a period of years.