Family Law Attorney Harry Margolis shares information on how families can set aside funds in a trust to help support their special needs adult.
Harry Margolis is a family law attorney with the Boston law firm Margolis Bloom & D’Agostino. This series from Mainstay Supportive Housing explores different topics related to finding the right supportive housing for your loved one with intellectual or developmental disabilities. This interview has been edited for length and clarity.
1. Please tell us why it’s important for families with disabled children to establish a special needs trust.
It’s basically a way to set aside money for a child with special needs so that we manage well. The child can still qualify for any public benefits they may need now or in the future.
2. Can you explain the different kinds of trusts that families should consider?
There are really three different kinds of trusts. There’s a trust that the parents or potentially grandparents set up for the child as part of their estate plan, and usually it’s not funded until they pass away. That’s often referred to as a Third Party Special Needs Trust, with the funds of the parent or grandparent [left] for the benefit of the child, the third party. So that’s No. 1. No. 2, sometimes the child themself may come into money, they may be injured (the disability may be a result of an injury), and so they may have a personal injury award. Or they may inherit money which hadn’t been planned for, or they may become disabled after they’ve earned some money. In those cases, it’s somewhat more restrictive what the trust can be. It’s called a First Party Trust because the beneficiary’s own money and they’re special rules for those trusts. And the rules are in a statute that’s often referred to in terms of the name of the trust, they’re often called a “D4A Trust,” which refers to the Medicaid statute that authorizes these trusts. Then the third kind of trust is a Pool Disability Trust. It’s actually authorized under another part of the Medicaid statute, and these are a number of trusts that are operated by a nonprofit association. In Massachusetts, the principal one is called the Plan of Massachusetts.
3. What can a special needs trust be used for?
It can be used for just about anything. So, the trust itself is usually not restrictive in how it can be used. It’s totally discretionary. Where the restrictions come in sometimes has to do with the public benefits programs that the child or beneficiary may qualify for. For instance, under the Mass Health’s Medicaid program, there’s some limits on income and assets. More restrictive is Supplemental Security Income (SSI), where if an individual who’s a beneficiary has money coming in, they lose their benefit dollar for dollar. So, the trust can’t give them money, but they can’t still spend money on their behalf. That’s the major restriction.
4. Are there qualifications necessary to be a beneficiary of a special needs trust?
It depends on the type of trust. For the Third Party Trust, someone’s setting it up for someone else, there’s no restriction; you don’t have to meet any qualification, but that’s less true for some other trust. For the D4A Trust, again, you have to be disabled under the definition that’s used for determining disability, either for SSI or for Social Security disability income. So, to take advantage of that trust, you have to be able to show that you have a disability. Usually you do by already receiving this benefit.
5. What is the right time for families to begin setting up a special needs trust?
if you know that you have a child or grandchild with special needs when you’re doing your estate planning, that’s when you should do it. Planning ahead is always better, but if people don’t, you always do have the alternative of the Self-Settled Trust. So, it could also be done when someone does come into money, but again, that trust is a little more restrictive and it can be more difficult if the person themselves who comes into money doesn’t have the legal capacity to create estate planning documents, you might have to go to court to get it done. So, it’s really better to do it ahead of time.
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