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When a person in Kansas City has a disability, they may have a very limited income, if they can work at all. When this is the case, they may rely on government benefits, such as Medicaid to pay for their medical expenses. Such benefits are often means-based. Means-based means that a person with too many assets or too high of an income may not qualify. However, through the creation of a special-needs trust, a person with a disability does not need to deplete their assets to obtain Medicaid eligibility.

A first-party special-needs trust holds a person’s assets, if that person has a disability, so that person can remain eligible for Medicaid and other means-based benefits. While there are limits on how the funds in a special-needs trust can be utilized, in general, the funds can be used to pay for the person’s expenses, so long as the person with a disability does not accrue too many countable assets that would make him or her ineligible for government benefits. But, the money in a special-needs trust cannot pay for everyday expenses, such as food, shelter and utilities.

It used to be the case that if a person had a disability, his or her parents, guardians or other third party had to create the special-needs trust, even if the person with a disability was competent. But, now a person with a disability who is competent can create a special-needs trust without the assistance of a third party. Once a special-needs trust is created and the disabled person’s funds are placed in it, then the disabled person can submit his or her application for government benefits.

Special-needs trusts can be useful tools for disabled individuals in need of Medicaid or other means-based government benefits. However, they are complex legal documents that must be carefully prepared to be effective. An attorney may be able to help those wishing to create a special-needs trust understand what such trusts can accomplish and draft documents that are legally sound and enforceable.

Source: The Ledger, “Special-needs trusts for disabled individuals now easier,” Kevin R. Albaum, Feb. 8, 2017