Albuquerque Special Needs Trust Lawyer

A special needs trust can support loved ones without jeopardizing their ability to qualify for public benefits programs like Supplemental Security Income (SSI) or Medicaid.

These trusts are commonly used by families to support someone who was born with a disability or who developed one before they turned 18. Special needs trusts can also be set up by the individual with a disability, or by a benefactor who wishes to provide support without causing the beneficiary to go over their resource limit for benefits eligibility. 

There are many rules that govern special needs trusts since they are created specifically to help someone qualify for a public benefits program. Working with an Albuquerque special needs trust lawyer can help you understand all of the requirements, along with everything else needed to ensure the trust can succeed in its goals.

Find out more about how to set up a special needs trust when you call New Mexico Financial Law at 505-503-1637 or contact us online to schedule a no-obligation case review.

Advantages of Working With an Albuquerque Special Needs Trust Attorney

Special needs trusts must be created in compliance with specific federal laws. Grantors also have to keep eligibility criteria in mind when they are funded.

If any mistakes are made during the trust’s creation, the disabled person seeking public benefits may still be ineligible — and the trust cannot be revoked. The disabled beneficiary could also end up facing penalties or reduced benefits later if the trust is considered to be in violation of a program’s policies.

Working with an experienced Albuquerque special needs trust attorney can help you ensure that the trust is created with federal laws — and your disabled beneficiary — specifically in mind. Your attorney can help with critical decisions like:

• Whether to form a first-party, third-party, or pooled special needs trust
• What assets to fund the trust with, including considerations for avoiding taxable growth
• Who to select as trustee, whether it’s a close relative, guardian, non-profit, or a professional services provider
• How to optimally arrange for purchases (i.e., distributions) from the trust, and what types of purchases should be made so as to not reduce public benefits
• Preparing the trustee for paying taxes on trust income and accounting for the trust’s activities
• Arranging for a successor trustee in the event the primary trustee is unable to serve
• Planning for Medicare or Medicaid considerations
• Preparing for possible audits or inquiries
• Conducting estate planning for the trust creator and beneficiary
• Supporting you into the future, including answering questions, making needed adjustments, or handling challenges related to the special needs trust

Receiving public assistance can be very challenging, especially as agencies face reduced staffing levels and policy shifts that affect their ability to communicate with applicants. Our goal is to ensure that you have made all the necessary preparations for your trust to be compliant and capable of aiding the beneficiary in the ways you intend.

With the right preparations, individuals with disabilities can feel well-supported, both by public assistance programs and the loved ones who care about them.

How Does an Albuquerque Special Needs Trust Work?

A special needs trust mainly acts as a secondary payer to cover expenses not explicitly covered by benefits programs like Supplemental Security Income (SSI).

Normally, any money a disabled person receives could affect their countable resources, which could lead to penalties or disqualification from public assistance programs. A special needs trust offers a legal way for someone to support the benefits recipient, or for the benefits recipient to set aside some of their own resources, while still remaining compliant with program rules.

Like all trusts, a special needs trust involves three main parties:

• A grantor (also sometimes called a settlor or trustor) who forms the trust by giving it ownership of some of their assets
• A trustee, who oversees the management of the trust, including making distributions (e.g., cash payments) to the beneficiary or, in the case of a special needs trust, to another appropriate payee
• The beneficiary, who normally receives trust distributions directly, but in the case of a special needs trust, is supported through purchases made by the trustee

Types of Special Needs Trusts

Special needs trusts operate differently from normal trusts. The exact differences depend on the type of special needs trust that is created. There are three main types.

First-party “self-settled” (§ 1917(d)(4)(A)) special needs trusts

These irrevocable trusts are created on behalf of a disabled individual under 65 years old using their own resources. Commonly, these resources are inherited or received in a personal injury settlement.

The trust can be established by the disabled beneficiary, a guardian (e.g., a parent, grandparent, or court-appointed guardian), or by a court order. 

Importantly, after the death of the disabled beneficiary, all resources remaining in a first-party trust revert to the state, up to the amount of medical services paid for by Medicaid and other benefits programs.

Third-party special needs trusts 

These can be created by anyone other than the spouse of a disabled individual, their guardian, or the individual themselves. They can be funded with a broad range of assets, and there is no maximum age for the disabled beneficiary. 

The trust can be irrevocable or revocable, and it can be formed during the life of the grantor or as a testamentary trust after their death. These trusts are also not reversionary, meaning that the grantor is free to distribute the remainder of the trust to other chosen beneficiaries after the passing of the beneficiary with disabilities.

Pooled (§ 1917(d)(4)(C)) special needs trusts

These trusts are managed by a non-profit 501(c)(3) organization, which acts as trustee. Relatives and loved ones can establish sub-accounts using their respective funds, and the beneficiary can also contribute funds from their own estate. 

Contributions to a pooled trust are usually limited to discretionary savings, Social Security (SSA or SSI) payments, annuities, cash gifts, court settlements, and other income sources. They cannot be funded with securities like a stock portfolio, for example.

Federal laws also require that, upon the death of the disabled beneficiary, the remainder of the account will either be retained by the trustee non-profit or used to reimburse the state for Medicaid-covered services provided to the beneficiary.

What Types of Special Needs Trust Should I Use?

A disabled beneficiary can technically receive support from all three types of special needs trusts (unless they are over 65, in which case they cannot form a first-party special needs trust).

The type of trust you choose will depend upon the situation and how you intend to support the beneficiary.

• Pooled special needs trusts are best for groups of individuals looking to rally together finances to support a person in their family or community. 
• Third-party special needs trusts make the most sense when an individual benefactor wants to contribute to someone’s well-being, without the restrictions of a pooled trust. 
• First-party special needs trusts are usually needed when a disabled individual is entitled to income or resources but would be considered over the resource limit for program eligibility. This scenario usually happens when someone receives an inheritance, obtains a court-ordered settlement, or otherwise receives substantial assets, cash, or income.

Refer to an Albuquerque special needs trust lawyer for more guidance on which trust may be best for your particular situation.

What Can Disbursements From an Albuquerque Special Needs Trust Pay For?

Purchases from a special needs trust are not supposed to overlap with the goods or services covered by programs like Medicaid or Supplemental Security Income (SSI). These programs pay directly for the beneficiary’s necessary medical services and living expenses, including their expenses related to food, shelter, clothing, and utilities.

Accordingly, in the words of the non-profit Disability Rights North Carolina, “trust assets should be used to provide goods and services beyond those provided by public benefits programs.” 

Examples of typical costs that could be covered by the special needs trust include:

• Home maintenance and repairs
• Health insurance premiums, co-pays, cost shares
• Life insurance premiums
• Non-Medicaid-covered medical equipment
• Education expenses and necessary supplies
• Household goods
• Vehicle purchases, modifications, or expenses
• Cleaning and hygiene supplies
• Travel expenses, other than lodging
• Entertainment media, such as streaming subscriptions
• Electronics
• Massage therapy and other non-covered medical and wellness services

Payment for all of these goods/services should be disbursed directly from the trust to the provider by the trustee. Under no circumstances should the beneficiary directly receive cash or cash-like distributions (e.g., gift cards) from the trust.

Any direct contributions to the beneficiary or payments made for resources that are supposed to be covered by a public benefit are likely to reduce the beneficiary’s benefits amount. There may also be penalties assessed under certain circumstances, such as if an asset or account held in the trust is distributed directly into the beneficiary’s ownership.

Who Can Serve as Trustee for an Albuquerque Special Needs Trust?

For non-pooled special needs trusts, there are no explicit requirements as to who can or cannot serve as the trustee. 

It is common in first-party special needs trusts to have the guardian or another relative serve as a trustee. The donating grantor of a third-party special needs trust is likely to serve as trustee. However, in either case, the guardian or grantor may choose a professional services provider, , such as a bank, to act as trustee.

For pooled trusts, the non-profit organization serves as trustee.

Trustees of all types of special needs trusts have a fiduciary duty to serve the beneficiary. A fiduciary duty means they are responsible for making sound financial and management decisions. 

Accordingly, the trustee must act generally in the interests of the trust, and their decisions should reflect a commitment toward helping the trust to serve the beneficiary well. The trustee is also responsible for filing timely paperwork, reporting to interested parties (e.g., the grantor and beneficiary or their guardian), keeping up with taxes, and avoiding conflicts of interest.

With a special needs trust, trustees have additional duties. They must also:

• Regularly check in on the status of the beneficiary, their needs, and their general welfare
• Remain in communication and collaboration with guardians, family, and others who support the beneficiary
• Make sound decisions regarding when to make distributions and for what purpose
• Take steps to be aware and in compliance with the eligibility requirements for programs upon which the beneficiary depends
• File mandatory reports to benefits providers
• For minor beneficiaries, retain a bond to guarantee against misuse of trust funds, or obtain a court order freeing them from this requirement

If a person chosen to serve as trustee is an individual rather than a bank, they should be aware of all of their duties and have a plan to uphold them. The grantor, beneficiary, or supporting guardian should also create contingency plans in case the first-choice trustee dies, becomes medically incapacitated, or decides they no longer want to serve in the role.

Possible Additions or Alternatives to a Special Needs Trust in Albuquerque

For some individuals, such as those who are close to the resource limit or who have limited excess resources, it may make more sense to use a different strategy to qualify for benefits rather than a trust. These alternatives could also be used in addition to a trust.

Options include:

• Spend down — If the beneficiary or someone who directly supports the beneficiary is over the resource limit for Medicaid, SSI, or other programs, they have the option to simply spend the money until they reach the resource limit. They could spend the money on home upgrades, medical equipment, or even non-necessities like a vacation or nice clothing for the disabled beneficiary.
• ABLE Accounts — These accounts work similarly to a pooled trust but usually require fewer resources to set up. However, they are limited to contributions of $14,000 per year across all contributors. The account may also cause the beneficiary to be disqualified for SSI if their balance exceeds $100,000. In this case, benefits may be suspended for a period for the beneficiary to spend the excess.

Reach out to our Albuquerque trust law firm to evaluate all of your options and determine the optimal strategy for your loved one.

Get Guidance and Assistance From an Experienced Albuquerque Special Needs Trust Law Firm

Creating a special needs trust can be the right decision for supporting a loved one without cutting off the benefits they depend upon. Gifting these individuals cash or assets without the proper trust structure could be a costly mistake, one that ultimately hurts their ability to thrive and fully enjoy life. 

Find out how you can best support someone you care deeply about when you contact our Albuquerque special needs trust law firm. Schedule your confidential, no-obligation case review when you call New Mexico Financial Law at 505-503-1637 or contact us online.