Do You Need a Special Needs Trust?

May 24, 2018

Legal Matters

Presented by: Bradford & Holliman, Estate Planning,

A common mistake we hear from individuals with disabilities is that they need a special needs trust to qualify for Social Security disability benefits. While this is true for many people, it depends on the type of disability benefits the individual is receiving. There are two types of Social Security disability benefits: SSDI (Supplemental Security Disability Insurance) and SSI (Supplemental Security Income). A person receiving SSI disability benefits will need a special needs trust to hold assets that exceed the maximum limit of $2,000. A person receiving SSDI disability benefits should not need a special needs trust. The difference depends on the person’s work history.

SSDI is based on work history. If a person has obtained 40 work credits, 20 of which were earned during the last ten years, a person should be able to qualify for SSDI disability benefits. This means that if the person is found to be disabled, they can receive disability benefits and there are no limits on their income or assets. I often like to say that a person can be a millionaire and still receive SSDI disability benefits because it is solely based on whether the person is disabled and if they have sufficient work credits in the Social Security system. Conversely, a person that does not have the required work credits, will not be able to obtain SSDI benefits. Instead, the individual will apply for SSI disability benefits. This issue typically applies to children who are now adults and are disabled to the point they cannot work; or, a person that has not been in the work force very much over the last ten years and does not meet the work credit requirements.

To obtain SSI, the person must prove they are disabled and meet very strict financial criteria. In other words, the person must be very poor to receive the SSI benefits. Generally, the person cannot have over $2,000 in countable assets. If this person wants to qualify for SSI and has too many assets, the person can place the assets in a special needs trust and obtain SSI and Medicaid. Work closely with your attorney to prove the type of disability benefits you are receiving so the attorney will know if a special needs trust is right for you.

–Melanie Bradford Holliman