When to Consider a Special Needs Trust When Settling a Case

If you have a client who is disabled and receives Medicaid or Supplemental Security Income (SSI), some planning needs to be done before settlement to make sure the client maintains eligibility for those benefits.

One of the most popular settlement planning options for disabled clients is to place the settlement funds into a special needs trust. A special needs trust is an irrevocable trust established for the benefit of the client who receives Medicaid and SSI eligibility.

A special needs trust is an excellent option for clients who can’t or don’t want to spend down their settlement proceeds on allowable items in the calendar month the funds received (this approach is often referred to as a “spend-down”).

Funds placed into a special needs trust are not counted by Medicaid and SSI when determining ongoing eligibility for those benefits. 

The types of distributions allowed from a special needs trust are quite broad. The basic underlying principle is that the funds should be used for the benefit of the beneficiary (the disabled party for whom the trust was established).

Generally speaking, the funds in a special needs trust can pay for most everything that the client needs — except for food and shelter expenses. Food and shelter expenses are to be paid by the funds received from SSI. 

If you have a client on Medicaid or SSI, give us a call. We can walk you through the specifics of special needs trusts and see if it may be a good fit for your client.

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