For families with loved ones with disabilities and special needs, there are other resources available to allow a family to provide for a consistent quality of life for a disabled family member without violating any transfer rules or incurring any Medicaid lookback period. Special needs trusts can be employed in a variety of ways to both allow a person to provide for a disabled family member without jeopardizing their own potential Medicaid eligibility, and without endangering any public benefits or government benefits (such as Supplemental Security Income (SSI), other supplemental income, Medicaid, Medicare, Social Security Administration Disability (SSDI), Food Stamps, etc.). Any family facing long-term care with a need or desire to provide for a disabled family member should investigate the use of special needs trusts to create financial stability within the family while still qualifying for any and all governmental assistance programs.
Two types of trusts exist to assist family members in this journey:
First Party Trusts
For trusts created for the individual that requires care, the establishment of a “first party” trust can hold funds for that individual’s benefit while still allowing that person to qualify for Medicaid long-term care assistance. Sound too good to be true? Well, it is true, but there are restrictions attached.
When an individual wants to keep their own funds in a trust for their own benefit while qualifying for Medicaid, the trust available has certain restrictions. The principal requirement to be aware of is that a nonprofit organization must serve as the trustee. In Missouri, the state has created such an organization specifically created to serve as trustee for these disability trusts. The Midwest Special Needs Trust (MSNT) is an organization, created by the state of Missouri, specifically established to serve as trustee under first party trusts while still allowing the Indvidual to qualify for long-term care Medicaid.
How does the MSNT work? Cash and other liquid assets in the form of stocks or bonds, money market funds and treasury bills may be contributed to the trust. Also, receipts from insurance policies, annuities, or settlements may be used.
The money in an MSNT account is not considered as an available resource for the beneficiary. Distributions made to meet living and health care needs, to supplement, but not replace, the basic support provided by state government and other governmental programs, is not considered as income to the beneficiary. Upon the death of the individual, the State has the right to claim remaining proceeds in the trust to offset medical expenses incurred by the State. Contributions to the MSNT are not considered transfers of property by the disabled individual when the person is under the age of 65. Trusts with MSNT are administered as one pooled trust fund; however, separate accounts are established for each individual.
Third Party Trusts
The Midwest Special Needs Trust can also be used for “third party trusts,” i.e. trusts created by one individual for another family member or loved one. If the third party for whom the trust is being created is a child of the prospective nursing home resident, a trust for this disabled child does not require MSNT serve as trustee. Another family member can serve as trustee, and the trust is a private affair, with Medicaid still fully available to the grantor for long-term care. If the beneficiary is not a child, then MSNT is available, much like first party trusts, to serve as trustee and provide trust services, and allow for the disabled family member to benefit without jeopardizing the grantor’s long-term care Medicaid.
QMC is available to guide you through the establishment of a special needs trust, either private or through MSNT. Many times, the establishment of these trusts requires adjustments to estate planning. In those cases, QMC can assist you to find a qualified estate planning attorney to serve as part of the team.