A special needs trust can be an invaluable tool that may be used to provide for a disabled person. There are various requirements that must be met to create a special needs trust in Pennsylvania. However, once created, a special needs trust can alleviate some financial responsibilities for your loved one. If you or a family member need assistance creating a special needs trust, you should consult with an experienced Montgomery County special needs trusts and planning attorney. At Herr Potts and Potts, our attorneys understand the desire to provide for a family member who may have difficulty caring for themselves. Our attorneys are here to explain what a Pennsylvania special needs trust can pay for.
Special Needs Trust Rules
In Pennsylvania, a special needs trust (SNT) is created with the resources of a disabled person and is used to help the disabled person qualify for Medical Assistance. Specifically, an SNT is established when a trustor authorizes an agent (trustee) to oversee property and assets placed in the trust to benefit a third party beneficiary. The purpose of an SNT is to preserve a disabled person’s right to receive medical assistance or Supplemental Security Income (SSI).
The beneficiary of an SNT must be under the age of 65 when the SNT is created, and property or assets cannot be added to the trust after the beneficiary’s 65th birthday. The trust beneficiary cannot own more than $2,000 in assets to avoid losing their right to SSI or medical assistance. There are various types of assets that should be placed in an SNT to preserve the beneficiary’s access to SSI or medical assistance:
- Compensation from a settlement or lawsuit
- Property or assets that are inherited
- Money received from a life insurance policy
- Assets received in a divorce settlement
If a beneficiary receives one of the assets above and or another type of lifetime gift and it is not placed in their SNT, they can face tax repercussions. Every SNT must have a provision that allows the Department of Human Services (DHS) to seek reimbursement for medical assistance payments made on behalf of the SNT beneficiary. Therefore, an SNT needs to exercise caution to avoid becoming ineligible for medical assistance. Once a disabled individual’s medical assistance rights are terminated, it can be difficult to reinstate them.
To learn more about the requirements of SNTs in Pennsylvania, you should speak with an experienced West Chester trust lawyer.
Special Needs Trust Expenditures
Any distributions made from the SNT can only be used to assist the beneficiary of the trust. SNTs are typically used to provide funds for issues or activities that are not handled by their public assistance benefits. There are several types of expenditures that an SNT can deal with:
- Wheelchairs, breathing apparatuses, hearing aids, and other types of medical equipment
- Educational items like tuition, textbooks, school supplies, and even tutoring
- Phone bill
- A computer, equipment needed for a computer, and internet access
- Physician visits and eye or dental appointments
- Television and other similar forms of entertainment
- Furniture and other household items
- Equipment needed to repair or renovate a home
- Health and life insurance plans
- Vacations and related expenses like plane tickets and hotel rooms
This is not an exhaustive list of items that can be considered a special needs expense. Additionally, determining whether you can use your SNT assets to purchase a home or car is a complex issue. For example, if more than 15% of SNT funds are used to purchase a home, this may affect your medical benefits. Also, a person with a disability can only use their SNT to purchase one vehicle. The purchase of a luxury vehicle may not be approved by a Pennsylvania court or Medicaid agency unless it’s for a good cause. If these expenses are not handled correctly, you could risk losing your medical assistance benefits. Therefore, it is important to work with a lawyer who understands these complex rules and can help guide you through the administration of an SNT.
You should also be aware that there are several items that cannot be purchased using the assets from an SNT. Using SNT assets to fund these purchases may result in a significant reduction in your SSI benefits and possibly other benefits.
Work with Our Estate Planning Lawyers to Create a Special Needs Trust
If you wish to care for your family member by establishing a special needs trust, you should contact an experienced Delaware County estate planning lawyer. The lawyers at Herr Potts and Potts have represented clients in southeast Pennsylvania for over 80 years, and we are here to represent you. We understand the burdens of dealing with a disability, and we are for your family in your time of need. To schedule a confidential consultation, call us at (610) 254-0114.