|photo: Tim Pierce|
Social Security Disability Insurance (SSDI) is a federal program that typically provides cash stipends to people who have paid into the Social Security system and who can't work due to disability. (In some cases, it is possible to receive SSDI even if you haven't worked.) In most cases, when someone has been eligible for SSDI benefits for two years, he also receives Medicare, even if he is under age 65.
From a special needs planning perspective, SSDI benefits are fairly easy to deal with because the program does not have an asset limit or a restriction on unearned income, like interest or dividends. This means that a millionaire who meets the program's requirements can receive SSDI benefits alongside a completely impoverished person. It also means that from a purely financial perspective, a person with resources doesn't need to shelter her assets in a special needs trust in order to qualify for SSDI benefits as she would have to do if she were receiving means-tested government benefits like Supplemental Security Income (SSI) or Medicaid.
But this does not mean that SSDI beneficiaries should not have special needs trusts. In fact, there are many benefits to having a special needs trust that go far beyond the ability to maintain eligibility for SSI or Medicaid. For instance, a person with a mental illness may be unable to manage money. A special needs trust would allow that person's funds to be invested and spent appropriately by a qualified trustee. In another case, a person with special needs may be able to handle her personal finances but she might live in an environment where she is susceptible to mistreatment by others. In this situation, a special needs trust would provide an appropriate buffer between the beneficiary and the people who would otherwise take advantage of her.
When it comes to special needs planning, you never want to take anything for granted. Just because an SSDI beneficiary might not need Medicaid and SSI now, it doesn't mean she won't qualify for, or require, services from those programs in the future. For instance, an SSDI beneficiary may rely on private health insurance and Medicare, but if she loses her insurance and Medicare doesn't cover certain medications, it might be incredibly important for that beneficiary to receive Medicaid, which could make a special needs trust essential.
Finally, there is one particular type of special needs trust, called a first-party special needs trust, that is specifically designed to hold the beneficiary's own assets. In most of the examples above, this is the type of special needs trust that would be required. Unfortunately, only a parent, grandparent, guardian or court can establish a first-party special needs trust for the beneficiary, even if she is completely competent to create a trust on her own. Therefore, if the parent or grandparent of a person who receives SSDI has the capability, it is probably a good idea for him to create the trust for his child or grandchild, on the off-chance that it will have to be used later, instead of relying on an expensive and time-consuming court process.
There are lots of reasons to have a special needs trust beyond merely qualifying for government benefits. If you or a loved one receives SSDI and doesn't have a special needs trust, it’s time to talk with your special needs planner about your options.
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