Did you know that 1 in 6 kids in the United States have a developmental disability? As a caregiver of a neurodivergent child, you want to ensure their future is secure. That’s where a special needs trust can help. But wait, there have been changes, and it’s important to know the new rules for special needs trust. In this blog post, we’ll go over the latest updates and give you tips to help plan for your child’s future.
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What is a Special Needs Trust?
A special needs trust is a way to protect the money of kids with thinking and learning differences. It helps families make sure their children keep getting important government help, like Supplemental Security Income (SSI) and Medicaid. At the same time, it provides extra money for the child’s care and needs. To understand the new rules for special needs trust, it’s helpful to know the different types of these trusts.
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Different Kinds of Special Needs Trusts
There are three main types of special needs trusts:
- First-Party Trusts: These trusts use the child’s own money, like from an inheritance or a legal settlement.
- Third-Party Trusts: These trusts use money from someone else, usually a family member or close friend.
- Pooled Trusts: This is a type of first-party trust managed by a non-profit group. It lets many people with special needs put their money together for investment.
Each type of trust has its own rules and benefits. It’s crucial to pick the right one for your family’s needs.
What’s New in the Rules for Special Needs Trust?
Now that we know the basics, let’s see what’s new in the rules for special needs trust and how they might affect your family’s plans.
1. No Age Limit for First-Party Trusts
Before, people with disabilities could only make a first-party special needs trust if they were younger than 65 years old. But the new rules for special needs trust took away this age limit. Now, people of any age can set up a first-party trust. This change makes it easier for older individuals to create a trust for themselves, ensuring their needs are met throughout their lives.
The removal of the age limit also means that families have more flexibility when it comes to setting up a trust. It’s important to discuss this new rule with an attorney to correctly set up your trust.
2. More Ways to Set Up First-Party Trusts
In the past, only a parent, grandparent, legal guardian, or a court could set up a first-party special needs trust. The new rules added more people who can do it. Now, the person with disabilities can set up their own first-party trust without needing the court’s help.
This change makes it easier for people to take control of their own money and future. It also means that individuals can create a trust more quickly, without waiting for a court decision. Make sure to talk to an attorney about this new option and how it might work for your family.
Read More: State Medicaid Waiver Program
3. Changes to How Medicaid Gets Money Back
After the person who gets help from a first-party special needs trust passes away, the state might want to get back the money it spent on Medicaid while the person was alive. The new rules for special needs trust say that the state can only get money back from the trust if it’s named as the one who gets the money. This change lets families have more control over what happens to the money in the trust after the person dies.
To make sure your family’s trust follows the new rules, it’s a good idea to review your trust documents with an attorney. They can help you update the trust, if needed, so the state doesn’t get more money than it should.
How the New Rules Affect Your Family’s Money Plans
With these new rules, it’s important to check your family’s money plans to make sure they follow the latest rules. Here are some steps you can take:
- Talk to a Special Needs Lawyer: Get advice from a lawyer who knows about special needs planning. They can help you understand the new rules and make the right plan for your family.
- Look Over Your Trust Papers: If you already have a special needs trust, go over the papers with your lawyer. Make sure they follow the new rules for special needs trust.
- Think About Other Trust Options: Depending on your family’s money situation, you might want to look at other trust options, like a third-party trust or a pooled trust.
- Update Your Family’s Money Plan: Make any needed changes to your family’s money plan. This includes updating your will, who gets your money, and other legal papers.
Taking these steps will help make sure your family’s trust follows the new rules and protects your child’s future.
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Plan Your Child’s Future with Confidence
Knowing the new rules for special needs trust is important for parents of neurodivergent kids. By staying informed and taking action, you’ll make sure your child’s future is safe. They’ll be able to get the help they need and live a happy life. Don’t be afraid to ask for professional help and make any changes needed to your family’s money plan. Your child’s future is worth it!
FAQs About the New Rules for Special Needs Trust
What is a Special Needs Trust? A Special Needs Trust is a legal arrangement designed to financially support a person with disabilities, without jeopardizing their eligibility for public benefits like Medicaid and SSI.
What are the new rules for Special Needs Trusts? New rules may vary by location, but commonly address elements such as the trust's establishment, age restrictions, allowed expenses, and the treatment of leftover funds.
How can a Special Needs Trust benefit my child? A Special Needs Trust can secure your child's financial future, ensuring their needs are met without interfering with essential public benefits they may be eligible to receive.
What expenses can a Special Needs Trust cover? A Special Needs Trust can cover a variety of life-enhancing expenses not covered by public benefits, like education, therapy, personal care attendants, and recreation.
Who can set up a Special Needs Trust? A parent, grandparent, guardian, or court can set up a Special Needs Trust. Some jurisdictions also allow individuals with disabilities to establish one for themselves.
This post was originally published on April 23, 2023. It was updated on June 26, 2023.
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