What Is a Special Needs Trust in Florida?

How does a Special Needs Trust work?

To qualify for SSI or Medicare, the government limits how much an individual can have in the bank. An inheritance, or large sum payment, can disrupt this balance and jeopardize their benefits. A Special Needs Trust aims to ensure that this does not happen.

Instead of transferring the inheritance directly to a beneficiary (aka your loved one with special needs), the money will be transferred into a Special Needs Trust with a designated trustee, who will manage the funds on behalf of the beneficiary. And since your loved one will never have direct control over the money, Medicare and SSI administrators will not consider these funds when determining eligibility for benefits. The Trust ends when all the funds are spent or the beneficiary passes away.

How can a Special Needs Trust be used?

While the trustee cannot give any money directly to your beneficiary, they can use the money to pay for a number of goods or services, including (but not limited to):

• Personal care and home health assistance
• Out-of-pocket medical or dental costs
• Vacations and recreational activities
• Education and training
• Vehicles
• Home furnishings
• Clothes and other belongings

A Special Needs Trust can be incredibly valuable when planning for your loved ones’ future.

Should I use my IRA to provide for my special needs child?

Parents of a special needs child have different long-term planning concerns. Naming your child as the beneficiary of your IRA is one option for providing for their future financial needs.

Naming your child as the beneficiary can offer certain advantages, including:

• Rather than being subject to the standard 10-year time limit, payments to a child with a disability may be stretched out throughout their lifetime.
• Periodic payments help manage assets and ensure the child has funds to meet future financial needs.
• Periodic payments offer tax benefits. It allows tax payments to be spread out and can help take advantage of potentially lower future rates.

Unfortunately, there is one major disadvantage of using an IRA to provide for a child with a disability. As it is considered a source of income, it could impact their rights to other important benefits.     

A Special Needs Trust (SNT) is an important Estate Planning tool for parents who have a child with a disability. Also referred to as a Supplemental Needs Trust under section 732.2025 (8) of the Florida Statutes, it provides many of the same benefits as naming your child a beneficiary of your IRA. However, it also offers better protections:

• You can still spread out disbursements
• It avoids lump sum tax payments
• It does not impact your child’s rights to government aid or other benefits.

Various programs can help offset the cost of food, shelter, transportation, and medical care for a child with a disability. By not interfering with their eligibility for these benefits, a Special Needs Trust allows you to provide for ‘extras’ that would not otherwise be covered. This helps in ensuring an overall better quality of life.