As the caregiver of someone with special needs in Arkansas, we know you have a lot on your plate. Throughout your time caring for a loved one, you’ve probably heard about something called a Special Needs Trust. Researching and calling lawyers for more information about how Special Needs Trusts work is time consuming – especially for busy guardians juggling a lot of plates. The attorneys at ARlaw Partners know how important getting trust advice and answers is, so we want to help simplify that for you. We want to make it an easier, comfortable, and compassionate experience for our clients. Stress shouldn’t come from exploring or setting up an Arkansas Special Needs Trust. We believe that peace is what it should come with this process instead.

A Special Needs Trust, also known as a Supplemental Needs Trust or SNT for short, is a trust set up for someone with special needs to allow that person the benefit of assets placed in the trust while at the same time remaining qualified for government benefits such as Medicaid (administered by the Arkansas Department of Human Services) and Supplemental Security Income (SSI) (administered by the Social Security Administration). A trust is a legal document that allows a third party, called a trustee, to hold assets for the benefit of someone else (the beneficiary). Once a trust is created, accounts such as bank accounts or brokerage accounts can be opened in the name of the trust and funds can be placed in those accounts. Real estate can also be transferred into the trust as well as other property.

What is the Difference Between a First-Person Special Needs Trust and a Third Person Special Needs Trust?

There are two types of Special Needs Trusts. One is funded with assets from a third-party, such as a parent, grandparent, or other relative of the person with special needs, who want to make sure that he or she is provided for while still maintaining government benefits such as Medicaid and SSI. This type of trust is known as a Third-Person Special Needs Trust. The assets in a Third-Person Special Needs Trust are owned by someone other than the person with special needs and are transferred to the trust either as a gift or an inheritance for the person with special needs’ benefit. The assets in the trust are managed by a trustee, not the person with special needs. They can be used for the special needs person during his or her lifetime and, after the person with special needs dies, any assets left in the trust can be passed to beneficiaries designated by the family member who set up the Third-Person Special Needs Trust.

First Person or Self-Settled Special Needs Trusts

The other type of Special Needs Trust is a First-Person or Self-Settled Special Needs Trust, also known as a (d)(4)(a) Special Needs Trust (for the section number of the federal law that authorizes the trust). This trust is funded with assets already owned by the special needs child or adult. This usually occurs where the special needs person receives an award as a result of a lawsuit (such as a car accident) or inherits assets from a relative who did not set up a Third-Person Special Needs Trust before they died. A First-Person Special Needs Trust is also set up to ensure that the special needs person is not disqualified from benefits like Medicaid or SSI because they own too many assets. To be eligible for SSI in 2022, assets or countable resources must not be worth more than $2,000 for an individual or $3,000 for a couple. Assets in excess of the Social Security Administration’s limits can be placed in the Special Needs Trust to allow the special needs person to continue to receive public benefits. Once assets are placed in the First-Person Special Needs trust, they are no longer owned or controlled by the person with special needs, they are owned by the trust and managed by a trustee appointed in the trust document. The downside to a First-Person Special Needs trust is that any assets left in the trust after the person with special needs dies must first go to pay back the government for benefits received by the special needs person before they can be given to relatives or other beneficiaries.

What Can Assets in a Special Needs Trust be Used For?

The assets in a Special Needs Trust should be used to supplement government benefits received by the special needs child, not to supplant them. Federal and state benefits programs have strict rules on how assets in a Special Needs Trust can be used for the benefit of the person receiving public benefits. Money from the trust should never be given directly to the person with special needs and funds from the trust generally should not be spent on food or shelter for the person with special needs. The trust can pay for things such as medical needs, recreation, and education for the special needs person. It can also pay for travel expenses and household items such as computers, phones, and other electronic equipment and appliances. The trust can also pay pre-paid burial expenses of the special needs person and for legal fees and costs for the special needs individual.

If you would like more information regarding Special Needs Trusts or need assistance with creating a Special Needs Trust, feel free to contact our firm AR Law Partners, PLLC. ARlaw Partners has knowledgeable and compassionate attorneys. We offer free initial consultations. We have offices conveniently located in Little Rock and Fayetteville and offer assistance to Arkansans throughout the state.