Your Guide to a Special Needs Trust Colorado
What Is a Special Needs Trust?
As a parent or guardian, you may not help but worry about the well-being of a family member with special needs and wonder who will care for them when you are not around. Setting up a special needs trust might be a great way to manage your assets in a way that would ensure their financial security and well-being.
Also known as supplementary care or supplemental needs trust, a special needs trust is a discretionary trust created for the benefit of individuals with special needs.
The creation of the trust ensures that needs not covered by public programs are met while preserving the individual’s eligibility for public benefits like Medicaid and Supplemental Security Income (S.S.I.).
Federal and state laws govern the establishment of special needs trusts in Colorado, which may complicate the process of establishing a trust for a loved one with special needs. Hiring a qualified estate planning attorney may help ensure that necessary funds are available without jeopardizing the family’s financial security.
Read on to learn more about establishing and maintaining a special needs trust for your loved one.
Eligibility Criteria for Public Benefits
Most public benefit programs, including Medicaid’s Home and Community-Based Services (H.C.B.S.) and the Supplemental Security Income program (S.S.I.), have requirements that a person must meet to be eligible. Eligibility criteria for public benefit programs may include the following:
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Having a limited income
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Being disabled, as defined by the Social Security Act
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Possessing no more than $2,000 worth of non-exempt or countable assets
Government agencies assess whether assets (including trust funds) should be factored in to evaluate one’s eligibility for government benefits.
A person can generally only qualify for S.S.I. and most Medicaid programs if they have non-exempt assets worth less than $2,000.
In principle, so long as the person has access to a resource or asset, it will be counted against the $2,000 limit.
The Social Security Administration and the state may ignore some exempt assets, such as a primary residence, one car, some types of personal property, and a few other items. Nearly everything else is taken into account while determining whether an individual’s countable assets exceed $2,000.
Determining and protecting the eligibility of your special needs child or family member for government benefits can be complicated. You may want to get estate planning help and guidance from an experienced attorney.
Parties Involved in a Special Needs Trust
A trust is a relationship where one person, known as a trustee, manages the property with the duty of keeping or utilizing it for the benefit of another. It typically involves the following parties:
- Grantor: The person who establishes the trust and transfers the initial property to the trust is the grantor or settlor. The grantor is usually a parent or legal guardian.
- Trustee: The trustee is the person or organization in charge of trust administration, which involves investing and distributing the trust’s assets and property per the grantor’s wishes. Only the trustee can access and distribute the funds in the trust to protect the beneficiary’s assets and eligibility for Medicaid or S.S.I.
- Beneficiary: The beneficiary of the trust is the person with special needs entitled to the funds held by the trustee.
Types of Special Needs Trusts in Colorado
There are three types of special needs trust funds in Colorado. Depending on your situation, you may choose between the following trust types:
Disability or Self-Funded Trusts
A disability trust is established for the sole benefit of an individual with disabilities to preserve their assets without endangering their eligibility for Medicaid and S.S.I. Usually, disability trust funds are established with assets belonging to the person with special needs.
Federal and state laws stipulate that only individuals under 65 may form a disability trust. Since a disability trust is established with the person’s assets, any assets remaining in the trust upon the death of the trust beneficiary must be first used to reimburse Medicaid for the medical assistance provided to the beneficiary.
After the Medicaid reimbursement has been settled, the remaining assets may be transferred to the beneficiary’s heirs.
Third-Party Trusts
Third-party-created trusts are formed to benefit an individual who is aged or disabled. Usually, third-party trusts are funded by family members or guardians of the person with special needs.
When family members, friends, or others wish to transfer assets to an elderly or an individual with disabilities without affecting that person’s eligibility for Medicaid or S.S.I., they can create a third-party trust for the person’s sole benefit.
A third-party trust can be established either as a living trust (inter vivos) or a testamentary trust by a will.
Testamentary Special Needs Trusts
A testamentary special needs trust is outlined in a person’s last will.
Usually, this type of trust is established and paid for after the grantor’s death, using the decedent’s assets for the designated beneficiary’s benefit.
The testator can determine the manner of distribution of any remaining trust assets in the event of the beneficiary’s death.
Pooled Trust Funds
Non-profit organizations manage pooled trusts that have asset contributions from multiple people.
Unlike the other two types, pooled trusts are created for many people instead of just one individual. Each person has an independent account that they can fund. Pooled trust assets are then combined and invested as a whole. The investment revenue is then shared with the beneficiaries in proportion to their contributions.
How Can Duncan Legal, PC Help You?
Depending on your circumstances, it may be possible to establish a special needs trust without the assistance of an attorney. However, due to their complexity and possible risks, most people hire experienced attorneys like those at Duncan Legal, PC.
Your trust document needs to be crafted well. For greater efficacy, the document must meet the requirements of the state and federal laws. Using the right words is critical to ensure that you establish a special needs trust without harming its integrity and compromising a loved one’s eligibility for public benefits like Medicaid and the Supplemental Security Income program.
Knowledgeable lawyers from Duncan Legal, PC can help you draft watertight trust documents to meet your intended purposes.
For additional information about establishing a special needs trust in Colorado or any other queries concerning estate planning, contact our attorneys at Duncan Legal, PC today!
