Special Needs Trusts in Pennsylvania: Protect Your Vulnerable Loved One

The hard truth is that the typical Pennsylvanian family cannot financially care for a family member with severe disabilities on an ongoing basis. Medical, residential and personal care for someone with severe physical or intellectual disabilities can easily run at least $1,000 weekly.

Therefore, federal and state public benefits must provide those with serious disabilities with funding for health care, transportation, and long-term residential and vocational services. Many government benefit programs are need based (Supplemental Security Income, Medical Assistance and food stamps, for example), and to be eligible, beneficiaries must meet strict income and asset limits.

A problem arises when a well-meaning relative or friend wants to give a gift or leave money in a Will to someone with disabilities who is on public assistance. Even people of modest means often choose to provide for those with special needs as much as possible, but direct money transfers can put beneficiaries in violation of program asset limits, which are very limited.

Similarly, a close relative (parent or grandparent, usually) may pass away without a Will, causing his or her loved one with disabilities to inherit the estate under state law. This type of cash receipt can also jeopardize benefits.

Sudden benefit ineligibility can be a true crisis. Some programs have limited funding and if terminated, a recipient with disabilities might be on a waiting list for years before another spot opens up.

Another potential repercussion of receiving money is that the government might assert a claim and ask that the gift or inheritance be used to reimburse the state for benefits already received.

A special needs trust can be the answer to these problems for many people with disabilities and their families.

A trust is a legal arrangement whereby the donor of money (or property) places assets under the control of a trustee with the responsibility to spend it for the benefit of a third-party beneficiary. A trust can be set up during the donor's lifetime or as directed by a Will at death.

The special needs trust - also called a supplemental needs trust - provides for a beneficiary with disabilities in a way that will not disqualify him or her from public benefits.

The structure of a special needs trust and the specific features it must contain to be valid for this purpose depends on the type of benefit involved and on a complicated application of federal and Pennsylvania laws and regulations, as well as federal and state case law.

When properly set up a special needs trust prevents the money in trust from being counted as an "available asset" for purposes of the beneficiary's benefit eligibility.

Money from a special needs trust can pay for things not covered by public benefits, which alone allow only a Spartan lifestyle. Examples of typical special needs trust expenditures include therapies and dental work not covered by benefits, educational opportunities, vacations, furniture, home improvements, technology, entertainment and personal items.

It is good to get legal advice, however, before establishing a special needs trust or withdrawing money from the special needs trust so the money does not become "available" in the government's eyes. For example, the trustee should pay money directly to a merchant or service provider rather than put the trust money directly into the beneficiary's hands.

The bottom line is that the guidance of an estate planning attorney can be crucial from formation through administration of a special needs trust. The lawyer should have specific experience with these trusts because this is an extremely complex legal area.