After a spinal cord injury, it may be necessary to file a personal injury lawsuit. And if you receive financial compensation, setting up a special needs trust may also be necessary. For those who require Medicaid and Supplemental Social Security, a special needs trust will allow you to continue to keep your eligibility for these government-funded programs while still receiving money from the trust.
A special needs trust in this situation is considered a third-party special needs trust since you accumulated the money after your injury. Also, it is recommended that you have at least $100,000 before setting up a special needs trust due to setup and maintenance costs. For anyone with less than $100,000, consider a Pooled-trust or an ABLE Account; a savings account for people with disabilities that allows you to make over the maximum $2,000/month.
A great thing about a special needs trust is that it can pay for all of the life expenses Medicaid and SSI don’t cover, such as dental, vision, vacations, furniture, concert tickets, specialized medical equipment, adaptive vehicles, college courses and much more. If you meet the requirements and are still interested in a special needs trust, read on for the details.
How to Set-Up Your Special Needs Trust
You will first need to find an experienced spinal cord injury attorney to be at the helm of helping you set-up your special needs trust trust. You’ll also need to find financial advisers with spinal cord injury experience and family member/family friend willing to be involved in the trust.
Once you’ve identified all of the people you’ll need to setup a special needs trust, your next step is to meet with your financial planners to decide how much of your money to put into the trust. You can put as much money in your trust as you want, but as stated above, you will want to put at least $100,000 into it for it to be a financially sound investment. It costs approximately $2,000 to set up a special needs trust, but this cost can vary from state to state. Banks will also charge an additional fee per year on the account with the trust money this fee ranges from 0.5 to 1.5% per year.
In the case of a personal injury lawsuit, a special needs trust will be funded by the lawsuit money, which will be ongoing over the life span of the plaintiff. You’ll also need to find someone to fulfill all of the required rules for the special needs trust. If you aren’t sure what the rules are, contact the wealth adviser for advice. In order for a trust to be successful, three roles need to be filled by people you can trust. There are:
– Settlor: Sometimes called the Grantor, this is the person who sets up the trust and provides the money. In a personal injury lawsuit, this would be a bank or another entity representing the defendant.
– Beneficiary: You; i.e. the person with the disability/spinal cord injury.
– Trustee: A person you can trust chosen to manage the money for the sole benefit of you.
How a Trust Works
After a special needs trust has been set up, the trustee does most of the work, as it is their responsibility to manage the money in the trust until the money runs out/for the life span of the beneficiary. It will be the trustee’s responsibility to make sure the smooth delivery of the money into the beneficiary’s account on a regular basis. In order for this to occur, here is a list of their responsibilities:
– Ensure that the money in the trust is only spent on the beneficiary.
– Keep track of all spending with the money from the trust.
– Prepare annual reports of the trust for SSI and Medicaid.
– Pay attention to any change in laws pertaining to SSI and Medicaid in order to best protect your beneficiary. You do not want them to lose their benefits.
– File Federal and state trust tax returns each year.
And lastly, remember that the funds from your special needs trust needs to be spent on everything that SSI and Medicaid does not cover. As we stated above, this ranges from everything from home environment technology to adaptive vehicles. For more information on setting up a special needs trust after a spinal cord injury, please contact us if you have any questions regarding your particular situation/injury.