Distributions from Special Needs Trust

You might have considered including special needs trust in your estate plan. If so, then you need to know the importance of distributions from special needs trust. They must fall in accordance with the terms of the trust so that the creator remains eligible for the government programs.

Effect of Distribution

You might be aware of the fact that special needs trust is intended to provide for a disabled loved one without affecting their eligibility for government benefits. These programs include Supplemental Security Income and Medicaid coverage.

However, federal law requires a reduction in the benefits of the creator proportional to how much income and assets the beneficiary receives.

Distributions that Will Affect Benefits

Following distributions will result in the reduction of benefit the beneficiary receives from the government:

  • Cash distributions from trust to the beneficiary
  • Distributions made to third parties for food shelter for the beneficiary
  • Distributions of property: here the assets that cannot be converted to cash, food or shelter won’t reduce the benefits while the property that can be converted to cash will result in the reduction because it will be considered a cash equal

Distributions that Will Not Affect Benefits

Following distributions will not reduce the benefit the beneficiary receives:

  • De Minimis Gifts: the rules for reduction do not apply to the first twenty dollars received by the beneficiary in whatever form for whatever purpose
  • Personal items and transportation such as clothing and furnishes
  • Burial and funeral arrangements such as burial space and costs
  • Loans to the beneficiary
  • Educational and vocational services
  • Medical expenses such as those for dental or any other care will not reduce benefits

Contact a Knowledgeable Attorney

If you are planning to establish a special needs trust to help a disabled loved one, a knowledgeable estate planning attorney will help you out. Contact Keystone Asset Protection and Estate Planning today and choose the best for yourself.