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Posted on Tuesday, July 7th, 2015 by Peter Klenk

From our “Ask a Question” mailbag: My son is a special needs child in Philadelphia on Medicaid, and I want to leave money at my death for his care. I have heard that Special Needs Trusts are becoming more liberal, is that true?

Special Needs Trusts have been available for many years, allowing parents to leave money for a child’s care that “supplements” but does not “supplant” what government programs provide. In this way, your child can qualify for Medicaid but the trustee can use the money you set aside for your son to provide him with the extra things that the government program does not provide.

Initially, the statute was interpreted to require that if the child was eligible for a government program, the trustee was prohibited from using the Special Needs Trust funds to provide whatever that program provided. Rightfully so, parents were concerned that if the government program was sub-par, the child was stuck with the program.

Like most things, Special Needs Trusts are evolving and being reinterpreted. Currently, it has become acceptable to add language to a trust that allows the trustee to make distributions to the Special Needs person that will reduce or eliminate government benefits if the trustee determines that

  1. The Beneficiary’s needs will be better met, and
  2. It is in the Beneficiary’s best interest to suffer the loss of government benefits.

To further protect the Special Needs person, we can also add language so that if the rules shift back the other way and the mere existence of this power results in the loss of government benefits then the power is void. This change gives the Trustee more flexibility to react to future events, and gives parents more peace of mind.

If you have any other questions about Special Needs Trusts, feel free to contact our office for a free consultation.

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