Creating a Special Needs Trust in Florida: What You Need to Know

When life throws curveballs in the form of disabilities, it is important to be prepared financially. One way to do this is through a special needs trust, particularly in the sunny state of Florida. 

This trust safeguards a physically or mentally disabled person’s eligibility for government aid, such as Medicaid or Supplemental Security Income (SSI). Let’s take a deeper dive into the nitty-gritty of creating a Special Needs Trust in Florida.

Understanding the Special Needs Trust: The Basics

A Special Needs Trust (SNT) is a strategic financial tool designed to supplement, not replace, the benefits a person with disabilities may receive from federal and state programs like Medicaid or SSI. Here are some key points to understand:

Purpose: The SNT’s primary aim is to protect a disabled individual’s eligibility for need-based government benefits. While the trust doesn’t duplicate government aid, it helps to enhance the beneficiary’s quality of life by funding supplemental needs.

Supplemental Needs Coverage: These trusts cover a wide array of expenses to improve the beneficiary’s standard of living. They can fund non-covered medical treatments or therapies, personal grooming essentials, clothes, electronic devices for ease of communication, companionship, housekeeping services, insurance premiums, and more.

Medicaid Eligibility: The assets held in an SNT are not counted for Medicaid eligibility. This is critical because a disabled person can still avail of government assistance while having a separate source of funding for additional needs.

Trustee Responsibilities: The trustee plays a vital role in an SNT. The trustee has to manage and distribute funds from the trust without jeopardizing the beneficiary’s eligibility for government benefits. Improper disbursements could lead to a loss or reduction of the beneficiary’s benefits, highlighting the significant responsibility borne by the trustee.

Third-Party Special Needs Trust: A Safety Net for Beneficiaries

Third-party SNTs are one of the two primary types of SNTs. Let’s delve into the characteristics of this trust:

Establishment: Third-party SNTs are set up by a family member (often a parent or grandparent) or a friend for the benefit of a disabled person. The trust’s creator contributes their assets to the trust. The disabled individual is the beneficiary but has no control over the trust’s assets.

Goals: The main goal is to retain the beneficiary’s eligibility for government assistance while offering additional benefits that Medicaid or other programs do not cover.

Beneficiary Rights: A crucial aspect of third-party SNTs is that the beneficiary cannot demand income or principal from the trust. This restriction ensures the beneficiary does not disqualify themselves from need-based government aid by accessing the trust funds directly.

Flexibility and Control: This type of trust can be established by anyone at any time, irrespective of the beneficiary’s age. Also, the trust can be amended or terminated by the trust’s creator as per the terms set out in the trust agreement.

Distribution after Death: If the beneficiary passes away without having used all the money in the trust, the remaining assets are typically distributed to the beneficiary’s heirs or designated charities as per the trust’s terms. Unlike self-settled SNTs, there is no requirement for payback to the state government for Medicaid expenses.

Self-Settled Special Needs Trusts: Empowering the Disabled

Self-settled special needs trusts (also known as first-party SNTs) represent a different approach for individuals with disabilities who wish to secure their eligibility for government assistance while preserving their own assets. Here’s a deeper look:

Establishment and Beneficiary: Self-settled trusts are established by the disabled individual themselves or someone acting on their behalf, such as a parent, grandparent, or a court. In this case, the trust creator and beneficiary are the same person. 

Often, self-settled SNTs come into play when disabled individuals receive substantial assets, like an inheritance or a personal injury settlement, which might otherwise disqualify them from Medicaid or SSI.

Age Limit: One of the key differences between third-party trusts and self-settled trusts is the age restriction. Only disabled individuals under the age of 65 can establish a self-settled SNT.

Irrevocability: Self-settled SNTs must be irrevocable, which means the trust maker cannot change, amend, or dissolve the trust once it’s been established.

Payback Provision: Lastly, self-settled SNTs necessitate a payback provision. After the beneficiary’s death, any remaining assets in the trust must be used to reimburse the state for Medicaid benefits received by the beneficiary during their lifetime.

The Pooled Trust: A Collective Safety Net

The pooled trust offers a unique alternative within the category of self-settled SNTs. It works as follows:

Management: In a pooled trust, the assets of multiple individuals are consolidated and managed collectively by a nonprofit organization, which acts as a professional trustee.

Individual Accounts: Each beneficiary has a separate account within the pooled trust. The assets in these accounts are “pooled” together for investment and management purposes, which can lead to potential benefits in terms of economies of scale.

Age Flexibility: Unlike standard self-settled SNTs, pooled trusts do not have an age limit for beneficiaries. This makes them a suitable choice for individuals over 65 who suddenly acquire significant assets.

After Death: Upon an individual’s death, the remaining assets in their sub-account can either be paid back to Medicaid or retained in the pooled trust to benefit other members. This provides a safety net for those who may have exhausted their resources, ensuring ongoing support for other trust beneficiaries.

The Power of ABLE Financial Accounts

ABLE financial accounts offer an additional financial tool created by Congress to alleviate financial burdens faced by disabled individuals. 

The benefits of ABLE accounts include tax-free growth of qualified financial investments, and funds in these accounts can be used to cover qualified expenses like education, housing, and transportation. 

Contributions to an ABLE account are made with after-tax money and the total annual contributions to save space.

Plan Your Trust

Special Needs Trusts are powerful financial planning tools that empower individuals with disabilities and their families in Florida and across the United States to maintain quality of life while preserving eligibility for essential government programs.

Establishing any form of Special Needs Trust or an ABLE account requires careful planning and legal expertise. As each state may have specific rules regarding trusts and public assistance, it is advisable to consult with an experienced attorney or financial planner who specializes in special needs planning.

In the face of life’s uncertainties, these tools offer invaluable peace of mind, helping ensure that your loved one’s needs are met today and in the future.

The information in this blog post is for reference only and not legal advice. As such, you should not decide whether to contact a lawyer based on the information in this blog post. Moreover, there is no lawyer-client relationship resulting from this blog post, nor should any such relationship be implied. If you need legal counsel, please consult a lawyer licensed to practice in your jurisdiction.