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Understanding a Florida special needs trust

On Behalf of | Jun 17, 2022 | Estate Planning |

Many Florida families have a member who suffers from serious and permanent injuries or illnesses. These family members may be totally disabled and eligible for federal and state financial assistance, including Medicaid, Supplemental Security Income and Social Security Disability Insurance benefits (SSDI).

Florida offers its own financial assistance programs in the form of Child Care Financial Assistance and Temporary Assistance for Needy Programs. Virtually all these programs have financial eligibility limits that preclude persons with high incomes or large personal estates from receiving the financial benefits offered by these programs.

To free up the disabled person’s personal funds, the state of Florida and the federal government have devised an estate planning tool to allow potential beneficiaries of these assistance programs to retain a large amount of their personal wealth while still receiving financial assistance. The tool is called a “special needs trust” (SNT).

The basics

A special needs trust can be created by the person requiring financial assistance or by a close relative of the potential beneficiary, such as a parent, sibling, or grandparent. The trust must be irrevocable, and benefits can only be paid to the designated beneficiary.

The trust assets can only be used to pay for housing, clothing, food and healthcare for the beneficiary.

The person establishing the trust must designate a trustee to manage the trust assets in accordance with the trust document. The trustee must file an annual report with the state of Florida enumerating trust income and expenses and demonstrating that trust assets have been spent only for authorized items.

Assets deposited in the SNT are not included in the beneficiaries’ personal funds and do not count against the financial limits that determine eligibility for the state and federal assistance programs. In effect, the special needs trust takes the place of the federal and state assistance programs and allows the beneficiary to apply personal funds to other purposes.

Different types of SNTs

Florida residents can select from three types of SNTs: a private or first-party SNT, in which the funds come from the personal assets of the beneficiary, an institutional SNT in which the funds are deposited with an institution such as a bank for management, and a testamentary SNT, which is established by the will of the person creating the trust and providing the trust assets.

Conclusion

Anyone interested in establishing an SNT may wish to consult an experienced estate planning attorney for advice on the type of trust, methods of funding, and selection of a trustee.

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