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Special Needs Trusts Attorney in Englewood, CO and Tustin, CA



The federal government, through Medical and Supplemental Security Income (SSI) programs, assists those who become disabled, but there are limits on the assets the recipient can possess.

One way to qualify for these programs and still retain assets for the needs of life not covered by Medicaid (called Medi-Cal in the Golden State) and SSI is through the establishment of a special needs trust, or SNT.

An SNT can be funded either by third parties – generally parents and family members of the disabled – or by disabled persons themselves. Though this may sound like a scheme to trick the government, in truth, SNTs must meet strict standards and only be used for specific purposes. They cannot, for example, be used to pay for anything that Medicaid or SSI provides.

If you have a loved one who is disabled, or you are suddenly facing a disability, and you need to learn more about special needs trusts and perhaps even initiate one, contact The Law Offices of Bruce Peotter. We have offices in Englewood, Colorado, and Tustin, California. We proudly serve clients in the surrounding communities of Denver, and Orange County, California.

Qualifying for Medicaid and SSI

The Code of Federal Regulations governs how disability is defined for Medicaid and SSI, stating that “an individual shall be considered to be disabled … if he is unable to engage in any substantial gainful activity because of any medically determinable physical or mental impairment….” In addition, the disabling condition must be expected to last for at least 12 months or “until death.”

The two programs also have a limitation on personal assets of $2,000 for an individual and $3,000 for a couple; however, exemptions are allowed for a primary residence, a vehicle, and other necessities of life.

What a Special Needs Trust Accomplishes

By setting up a special needs trust, the disabled individual can have assets above the $2,000 threshold, but they must be managed by a trustee independent of the disabled beneficiary.

These funds cannot pay for anything for which either SSI or Medicaid provides benefits. In other words, the funds in a special needs trust can be used for the needs of life not covered by these programs, including but not limited to:

• Caregiving and personal assistance
• Housekeeping, cooking
• Computers, cell phones, television, appliances
• Grooming, dry cleaning, clothing
• Transportation costs
• Yard services, home security services
• Pet care
• Accountants’ and attorneys’ expenses

Types of Special Needs Trusts

Generally speaking, there are two special needs trusts; third-party and first-party.

A third-party SNT is created by the parents or relatives of the disabled person. Any asset is in the trust – jewelry, property, stocks and bonds, and art collections – but to provide cash for the disabled person’s needs would require non-liquid assets to be sold. As mentioned earlier, the trust must be administered by a trustee according to strict standards.

Once a third-party trust is in effect, anyone can contribute to it.

A first-party, or self-settled trust is established by the disabled individual with their assets. A first-party trust may be initiated when the disabled person suddenly inherits wealth, wins a lawsuit, or otherwise comes into money. It can also be established when a healthy person faces disability and needs the help of SSI and or Medicaid.

A first-party trust must use the assets of the disabled, i.e., the beneficiary, but can only be established by a parent, grandparent, legal guardian, or a court.

The difference between the two types of trusts is the remaining assets in the trust when the beneficiary dies. In a third-party SNT, the funds can be distributed to what are called “remainder beneficiaries.” In a first-party trust, Medicaid is the primary beneficiary. Once Medicaid removers what it has provided in benefits – if there is anything left – the other beneficiaries have a right to the assets.

What Is an ABLE Account?

In 2014, Congress passed the Stephen Beck Jr. Achieving a Better Life Experience Act, better known as the ABLE Act.

The ABLE Act allows disabled individuals and their families to set up savings accounts using post-tax dollars that help pay for expenses not covered by Medicaid or SSI. Funds can be invested by the beneficiary, family, friends, or a special needs trust.

Eligibility, however, is limited to persons who became disabled before the age of 26. You can sign up for a tax-sheltered ABLE account at any age, but the onset of your disability must have occurred before you turned 26.