A Matter of Trusts

Exploring approaches to setting aside money for future use

Trusts are legal arrangements that, in simplest terms, allow a person (known as the trustee) to hold and expend funds on behalf of another person, the beneficiary. You can be your own initial trustee and name a successor to take over if you can no longer serve. For some living with MS, naming a co-trustee to help you with the tasks, from inception, may be a better option. People considering establishing a trust need to consult an attorney with expertise in estate planning. Trusts that might be appropriate for a person with MS include:

Revocable living trust

This document directs where and how a person’s assets will be transferred while he or she is living, and also prevents those assets from being subject to probate proceedings in court following the person’s death.

Special needs trust (including Medicaid disability trusts)

These trusts can be established to pay for items that a person with a disability may need but that aren’t covered by government programs such as Medicaid. A special needs trust can either be funded by the beneficiary himself (a first-person trust) from sources other than income, such as a settlement or inheritance, or funded by a family member or other person (a third-party trust).

One of the main advantages of a special needs trust is that the assets in the trust are not taken into account when determining a person’s financial eligibility for Medicaid or Supplemental Security Income, so long as the trust is properly established and operated. It is important to note, however, that if a person established a first-person trust, Medicaid will seek to recover any assets remaining in the trust at the time of his or her death. Medicaid does not seek to recover funds from third-party trusts.

If a person is receiving Supplemental Security Income, special needs trusts generally cannot pay for basic items, such as groceries or rent. The laws governing special needs trusts are complicated, and vary considerably from one state to another. Further, there are important tax implications with this form of trust and other trusts, all making an attorney’s guidance essential.

In addition to trusts, people with disabilities may also want to explore setting up an ABLE (Achieve a Better Life Experience Act) bank account. People can save up to $100,000 in these accounts without those deposits affecting their eligibility for Medicaid or SSI.

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