1. What is a special needs trust?
An advantageous way to set aside money for a person with a disability. The trust is intended to help preserve funds to be used to enhance the person’s quality of life, while protecting his or her eligibility for public benefits, such as Medicaid and Supplemental Security Income (also known as “SSI”).
A 1993 federal law permitted the creation of special needs trusts; and the policies that must be followed in creating and administering them are detailed by the Social Security Administration.
2. I already have money saved. Why is a special needs trust necessary?
People with a disability who have savings of $2,000 or more lose eligibility for public benefits. However, money held in a trust is not counted when determining eligibility.
3. Is a person with any kind of disability eligible to participate in a special needs trust?
Any person who is “disabled” according to Supplemental Security Income Eligibility Requirements is eligible. PLAN serves people with a wide variety of physical and mental disabilities—these include spinal cord injury, schizophrenia, severe heart disease, vision loss, dementia, bipolar disorder, autism spectrum disorder, and many other conditions.
In addition, pooled special needs trusts—which are defined in number 5, below—can be established to benefit people over age 65; while individual trusts can only be created for people under age 65. In practical terms, this means that a pooled trust can be created for someone who has age-related disabilities, but does not have injury- or illness-based disabilities or life-long physical, emotional, or intellectual disabilities.
4. Can anyone put money into a disabled person’s special needs trust?
Yes. A special needs trust may be created by a disabled person or by family and friends.
A trust may be created by a disabled adult using his or her own money, such a trust is called a “first-party trust.” (A first-party trust may be created for a disabled child by a parent, grandparent, legal guardian, or the court.) The money placed in the trust may come from gifts, inheritance, legal awards, or savings accumulated before the person became disabled. PLAN administers a first-party trust called the “MARC Special Needs Pooled Trust.”
Trusts also may be created by family or friends on behalf of a disabled adult. These are known as “third-party trusts.” They can be funded through gifts, inheritance, or life insurance proceeds. The third-party trust can be funded as soon as it’s created or at some later time. PLAN administers a third-party trust called the “Third-Party Special Needs Pooled Trust.”
Neither of PLAN’s pooled trusts can be funded with real estate or personal property.
5. What is a pooled special needs trust?
A pooled trust is a type of special needs trust administered by a nonprofit organization. A separate account is established for each beneficiary within the trust, but the funds from all accounts are “pooled” for investment purposes. Pooling reduces administrative costs and overhead—leaving more assets for the beneficiary.
6. Why join a pooled special needs trust versus creating an individual trust?
a) Pooled trusts have low initial costs and minimum balances. By comparison, creating an individual trust involves the cost of hiring an attorney to create trust documents, and high minimum deposits.
b) The sponsoring organization (in this case, PLAN) serves as the trustee—which relieves family members of the responsibility of finding (or serving as) the trustee.
c) Pooled trusts can be established to benefit people over age 65. Individual trusts can only be created for individuals under age 65. In practical terms, this means that a pooled trust can be created for someone who has age-related disabilities, but has not had life-long physical, emotional, or intellectual disabilities.
7. Who can benefit from participating in a PLAN special needs pooled trust?
- Want to ensure their disabled loved one has the resources and assistance necessary to live a full life—when the family can no longer provide support.
- Do not want to burden relatives with the responsibility of managing a trust, or the challenge of complying with legal rules on trust disbursements
- Cannot afford individual trust set-up, minimum deposit, and management costs.
- Want to leave money for a disabled loved one without jeopardizing her access to public benefits.
People with disabilities who—
- Are over age 65, and want to preserve their assets and protect their public benefits.
- Are not able to manage money
- Have savings—or expect to receive legal settlements, insurance payouts, inheritances, or gifts—and need to protect eligibility for public benefits.
- Cannot afford individual trust set-up, minimum deposit, and management costs.
8. What does the trustee do?
The trustee has a series of responsibilities, including: accounting, investments, tax returns, and disbursement of funds according to complex federal and state regulations. Performing these responsibilities properly requires time; a working knowledge of the laws governing the trust and public benefits; financial management skills; and the ability to advocate for a person with a disability.
PLAN’s longstanding experience and reliability as a trustee is one of the main advantages of joining one of our pooled trusts. Since 1995, our team of licensed social workers, attorneys, and trust administration and investment professionals has helped thousands of beneficiaries get the care, goods, and services they need.
9. What can money in a special needs pooled trust be used to purchase?
Items and services that benefit the trust beneficiary, including necessities not covered by public benefits—such as medical and dental care, transportation, haircuts, clothing, and other necessary items and services. Also, goods or services that enrich the beneficiary’s life—such as books and magazines; movies and other types of entertainment; cell phones, computers, and tablets; travel; and classes and other educational activities.
10. For what purchases can trust funds not be used?
Items and services for someone other than the beneficiary, including gifts for others; as well as alcohol, pornography, weapons, or gambling. In addition, for people receiving SSI benefits, trust funds cannot be used for rent, utilities, or food (including food purchased at restaurants or convenience stores)—but for all other beneficiaries, these expenses are allowed.
11. How can money be withdrawn from a special needs trust?
These funds must be paid directly to the providers of the goods and services being purchased or reimbursed to third parties who paid on the beneficiary’s behalf. Money from the trust cannot be disbursed to the beneficiary. PLAN’s Service Coordinators review and approve beneficiaries’ requests for specific goods and services, and then arrange for payment or reimbursement.
12. How much does it cost to set up a trust with PLAN?
There is a one-time enrollment fee.
- For PLAN’s Third-Party Special Needs Trust, the fee is $500.
- For a MARC Special Needs Trust, the fee ranges between $600 and $750, depending upon whether the trust applicant can sign the application or needs someone to sign on his/her behalf.
There is also an annual fee for both trusts—covering the cost of investment management, trust administration and social services for the beneficiary. The minimum annual fee is $500, and the fee scales up from there based on the size of the participant’s account:
- 3% for the first $500,000
- 2.25% on the next $250,000
- 2% on the next $250,000
- 1.75% on funds above $1 million
13. How do I sign up for a PLAN trust?
The person with the disability or a family member fills out an application for an account. The process for creating an account generally takes two to three weeks.
14. Do I need to hire an attorney to apply for and create a PLAN trust?
Because a Pooled Trust is a legal document, we recommend that anyone interested in establishing a trust account should consult with an attorney. We want you to understand exactly how our trusts can benefit you and your family; and what restrictions and limitations the trust and trustee are under.
15. What happens to any money remaining in the trust after the beneficiary dies?
At PLAN, we encourage the people we serve to use the money in their trust accounts to get the care, services, and items they can afford, in order to enjoy their lives. Nevertheless, money sometimes remains in the trust.
When families create an account in PLAN’s Third Party Pooled Trust, they can choose where any remaining funds go after their loved one dies. They may direct it, for example, to be disbursed to another member of the family or to a charity. They also may donate some of the remaining funds to support PLAN’s Community Fund.
A person opening a MARC Trust account can name recipients of a portion of funds remaining after s/he dies. However, the remaining funds must first be allocated to (in order):
- PLAN’s account-closing costs of $600
- Tax statement preparation of $200 for MARC Special Needs Trust and $366 for Third Party Special Needs Pooled Trusts
- PLAN’s Community Fund will receive a sum equal to 10% or 20% of remainder, depending on how long the account was open
- Medicaid to repay costs of any care paid by Medicaid during the person’s life
Any funds left at this point can be paid to a person or group of people designated when the trust was established.