Notes of Lisa Wilson’s presentation on Special Need Trust – 9-11, 2010 at Tzu Chi Foundation

There are two (2) major government benefits for individuals with special needs, they are:

1. Social Security Program

      For those younger than 18, family income is included into consideration, therefore they often are denied of Supplemental Security Income (SSI). When they turn 18, eligibility for SSI is based on the following criteria:

      i. citizenship

      ii. a disability which prevent him/her from gainful activity

      iii. resource (must be less than $2,000 worth)

      iv. income

      Individual qualifies for SSI automatically gets Medicaid. The Maximal amount of SSI one gets in 2010 is $674 per month. When parents retire, their child with a disability that occurred before age 22 is eligible for up to 50% of a parent’s retirement benefit – this is called Social Security Disability Income (SSDI) based on parent’s work record. They also become eligible for Medicare. S/he will not get both SSI and SSDI; rather, S/he will receive whichever amount that is higher. However, s/he will receive both Medicaid and Medicare. By default, the amount of SSDI one receives will be the higher one of his two parents’. Also, when that parent becomes deceased, the amount can go up to 75%.

2. Medicaid Waiver Program

      The best known Medicaid Waiver Program is HCS (Home and Community Based Services), which pays for the caregivers for individual with special needs. In 2010, if an individual’s monthly income is higher than $2,022, then s/he is disqualified for Medicaid waiver program.

What Parents Should Do to Maintain The Life Care Plan of Your Special Needs Child

  1. Because of the aforementioned eligibility criteria for SSI and Medicaid Waiver Program, parents wishing to leave money for a child with special needs should establish a Special Needs Trust in order to protect that child’s benefit. All relatives wishing to leave money for that individual will leave the money to the trust, rather than to the individual.
  2. The Will, Guardianship and Special Needs Trust constitute the three (3) parts of long term planning for individuals with special needs. Often the special needs trust is established but not funded until parents are deceased, in which case the Will dictates how the trust is funded. Trustee and successor guardian are named in the Will. The guardian decides what the individual’s needs are, and the trustee dispenses the money from the trust accordingly.
  3. SSI is a Supplemental Security Income, whereas SSDI on parents’ record is an entitlement income. If an individual on SSI receives monetary support for food and shelter, s/he will end up getting a reduction of their benefit. While SSI money can only be spent on food, shelter and clothing, there is no such limit on SSDI money. Sometimes parents decide to fund the special needs trust late in their lives, by then their child most likely is on SSDI, therefore the money in that trust can be used without much restriction. A few examples are: paying for the traveling expense and fees of a guardian to come visit the ward, paying for vacation for the individual and a companion, or paying for a care manager who ensures that the individual’s needs are met.
  4. The trust is set up such that the primary beneficiary is the person with special needs, the secondary beneficiary is whomever the Will designates. As such, when the primary beneficiary dies, the amount left in the trust goes to the secondary beneficiary. The money designated into the trust is for the person with special needs, therefore cannot go back to the grantor.
  5. If, for some reason, a person with special needs ends up with a lump sum of money greater than $2,000, such as ompensation from a traffic accident, or inheritance from a relative, then a separate trust called “Self-Funded Trust” must be set up quickly. Only parents, grandparents, a guardian and a court can set up such trust. It is so named because the person receiving social benefit is using his/her own money to fund the trust. A “Self-Funded Trust” names the person with special needs as the primary beneficiary, and Medicaid as secondary beneficiary. As such, whatever money remains in the trust when the special needs person dies will go to the Medicaid.
  6. When an individual receives SSDI on parent’s record, there is concern that money may accumulate to more than $2,000 which exceeds the eligibility requirement for Medicaid. Parents or guardian may set up a Self-funded trust and periodically transfer unused money into the trust to cap the individual’s resource below $2,000.
  7. It is possible that an individual with special needs may receive a total monthly income higher than the maximum allowed for Medicaid waiver program. When this occurs, a Miller Trust, also known as Qualifying Income Trust (QIT) can be set up to allow someone to retain eligibility for the Medicaid Waiver programs. A Miller Trust must be spent down each month for the care of the beneficiary. A Miller Trust names the Medicaid as secondary beneficiary.


Important Note: The information contained herein is for general knowledge. Parents who plan to establish trust for special needs child should contact and seek legal advice from qualified/certified attorneys.