Parents and family members who want to provide for a loved one with a disability face a planning problem that a standard will or trust does not solve. Leaving assets directly to a person receiving Medicaid or SSI can disqualify them from those benefits. A properly drafted special needs trust solves that problem.
Schedule a ConsultationMedicaid and SSI are means-tested benefits. A person with a disability who receives a direct inheritance above the asset threshold can lose those benefits immediately. Regaining eligibility requires spending down the received assets and reapplying, a process that can take months and leave real gaps in care.
A special needs trust holds assets for the beneficiary without counting them toward Medicaid or SSI eligibility limits. The trust pays for things government programs do not cover while preserving the benefits that cover housing and medical care.
A third-party special needs trust is funded with assets belonging to someone other than the beneficiary, typically parents or grandparents planning ahead. This is the most common tool for families. There is no Medicaid payback requirement when the beneficiary dies.
A first-party trust is funded with assets belonging to the person with the disability, often from a personal injury settlement or an inheritance received before the trust was established. First-party trusts are subject to a Medicaid payback provision at death.
A standard will or revocable trust does not protect government benefits. A special needs trust must meet specific federal and state requirements. A document not drafted by an attorney experienced in this area creates real risk of disqualification.
Appropriate uses of a properly drafted third-party special needs trust typically include:
Cash distributions and payments for food and shelter are treated differently and can affect SSI benefit amounts. The trustee needs to understand these rules to administer the trust correctly.
A special needs trust is typically designed to last the beneficiary's lifetime. Life insurance is frequently used to fund these trusts, since it provides a guaranteed amount at death regardless of what other assets remain. Hoog Law integrates the trust into a complete estate plan, coordinating the document, will, beneficiary designations, and life insurance so the pieces work together.
Hoog Law is based in Longmont and works with families throughout Boulder County and the Front Range. Every special needs trust is drafted by Michael Hoog personally.
Hoog Law works with Colorado families on special needs trusts designed to protect long-term care and government benefits while providing for what matters most.
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