Social Security Disability Insurance (SSDI) is a federal program that typically provides cash stipends to people who have paid into the Social Security system and who can’t work because of a disability. In some cases, it is possible to receive SSDI even if you haven’t worked. In most cases, when someone has been eligible for SSDI benefits for two years, they also receive Medicare, even if they are under age 65.
From a special needs planning perspective, SSDI benefits are fairly easy to deal with because the program does not have an asset limit or a restriction on unearned income, like interest or dividends. This means that a millionaire who meets the program’s requirements can receive SSDI benefits alongside a completely impoverished person.
It also means that from a purely financial perspective, a person with considerable resources doesn’t need to shelter their assets in a special needs trust to qualify for SSDI benefits as they would have to do if they were receiving needs-based government benefits such as Medicaid or Supplemental Security Income (SSI).
However, this does not mean that people with disabilities who receive SSDI benefits should not consider special needs trusts.
What Is a Special Needs Trust?
A special needs trust (SNT) is a legal arrangement that allows individuals with disabilities to receive financial support without jeopardizing their eligibility for public benefits. (Some attorneys refer to special needs trusts as supplemental needs trusts.) The trust holds assets and funds for the benefit of the person with the disability. Because the assets do not technically belong to the beneficiary, but to the trust, the individual can access necessary services and care while still qualifying for programs like SSI and Medicaid.
Why Consider a Special Needs Trust?
The benefits of having a special needs trust can go far beyond one’s ability to remain eligible for SSI or Medicaid.
For instance, it can help manage additional funds that a person with a disability may need for medical expenses, therapy, or other essential services that go beyond what SSDI covers. This way, individuals can enhance their quality of life without risking certain other public benefits.
In another scenario, a person with a mental health condition may be unable to manage money. An SNT would allow a qualified trustee to invest and spend that person’s funds properly.
Other people with special needs may be able to handle their personal finances but perhaps live in a setting where they could be susceptible to mistreatment by others. In this situation, a special needs trust would provide an appropriate buffer between the beneficiary and individuals who might otherwise take advantage of them.
A special needs trust can be tailored to meet the unique needs of the beneficiary. It can be funded with various assets, including cash, property, or investments. This flexibility allows people with disabilities to maintain their independence and dignity while receiving the support they need.
In addition, SNTs that hold inherited retirement accounts can now name charities as remainder beneficiaries. So, funds that remain in the special needs trust following the death of the beneficiary can go on to support a charitable organization.
What If You Need SSI or Medicaid Benefits in the Future?
In the realm of special needs planning, you never want to take anything for granted. Just because an SSDI beneficiary might not need Medicaid and SSI now, it doesn’t mean they won’t qualify for, or require, services from those programs in the future. For instance, an SSDI beneficiary may rely on private health insurance and Medicare, but if they lose their insurance and Medicare doesn’t cover certain medications, it might be incredibly important for that beneficiary to receive Medicaid, which could make a special needs trust essential.
First-Party Special Needs Trusts
One of the main types of special needs trust is a first-party special needs trust. This type of trust is specifically designed to hold the beneficiary’s own assets. In most of the examples above, this is the type of special needs trust that would be most suitable.
Up until late 2016, only a parent, grandparent, guardian or court were allowed to establish a first-party special needs trust for the beneficiary, even if the person with the disability was completely competent to create a trust on their own.
Beyond merely qualifying for government benefits, there are numerous reasons to establish a special needs trust. If you or a loved one receive SSDI and do not have a special needs trust in place, consider consulting with your special needs planner to explore your options.
Contact Our Team
Clancy & Associates, Ltd., is the only full-service special needs planning law firm in Illinois. Our attorneys are dedicated to supporting individuals with special needs and their families. We, too, are parents and siblings of loved ones who have a disability and know how daunting and exhausting it is to go from firm-to-firm and provider-to-provider to find solutions and help.
Each child and family’s needs are very different — and we provide tailored, common sense ideas and strategies that reflect your goals, resources, and hopes for your family’s future security.
Contact us today to schedule a consultation to learn more about our services and talk about your planning needs.
