In December 2016, the Special Needs Trust Fairness Act became law at the federal level, meaning that Congress and the President in Washington D.C. passed it. It now is up to the states who make take some time to adopt their own version of the federal law. Thus, Florida is tasked with adopting its own version of the federal law concerning Florida special needs trusts.
Changes in the Law Governing Florida Special Needs Trusts [Added Protection for SSI and Medicaid Benefits]
Changes in the law governing Florida special needs trusts have added to the available options for a disabled person who seeks to protect assets while preserving “need based” disability benefits.
To set the stage for this topic, I began writing about Florida special needs trusts after having a conversation with a colleague about an individual who was informed by another advisor that he could not give any of his estate to a family member who was a minor and receiving need based (SSI) disability benefits.
If this individual had never asked around for a second opinion, a vulnerable young disabled person could have been limited for his lifetime to ONLY the resources offered by government support.
The law has provided a better solution for vulnerable disabled people among us who are on SSI disability. This solution is known as a Florida special needs trust a/k/a supplemental needs trust, and it just got better with the passage of the new law.
The following areas of Florida special needs trusts will be the focus of this article:
- The types of disability benefits that require the protection of s Florida special needs trust.
- How people who are receiving need based disability benefits (SSI) can easily LOSE benefits if certain steps aren’t taken.
- When a Florida special needs trust is allowed.
- How a Florida special needs trust is set up AND the requirements and options for doing so since the updates of the Special Needs Trust Fairness Act.
Types of Disability Benefits
People get confused about the various TYPES of disability benefits which are basically:
- Veteran’s Benefits
SSI is for low income people who are either elderly, medically disabled or blind. This is a means tested program like Medicaid, and thus to qualify one can only have limited or few assets.
SSDI on the other hand is a benefit program that is NOT need based. Eligibility for SSDI is based upon the number of work credits that someone has accrued prior to becoming disabled or by being the dependent or survivor of a deceased, retired or injured worker.
Medicaid is linked to the receipt of SSI in most states; however, the use of a Florida special needs trust is currently limited to those of age 65 or younger as we will discuss. So many who are on Medicaid and over age 65 will not be able to preserve assets through the use of a Florida special needs trust, though there are other Medicaid planning strategies to preserve assets.
Medicare is similar to SSDI as it is paid for and NOT “means tested” and eligibility is similar to qualifying for SSDI in that after 24 month of SSDI, the applicant usually qualifies for Medicare.
So to simplify, if someone qualifies for SSDI, they will receive Medicare AND if someone qualifies for SSI, they will receive Medicaid. Receiving social security also relates to Medicare and vice versa. For all of the above reasons, it is generally not necessary to utilize a Florida special needs trusts to preserve SSDI or Medicare benefits.
Veterans’ benefits refers to benefits received by Veterans or the spouse, children or parents of a deceased Veteran. These benefits are governed by their own rules and administered by the U.S. Department of Veteran’s Affairs (VA). Current VA interpretation of the rules suggests that transfers to a Florida special needs trust may not be fully effective for Veterans.
According to the VA rules, assets in a special needs trust may be “counted” when calculating for eligibility for various benefits such as an improved pension. Also, the VA may place a freeze on benefits under current laws. In any event, attorneys must obtain a special certification to advise beneficiaries in this area.
Given the above distinctions with OTHER disability benefits…
SSI is a highly special type of disability benefits that is often synonymous with Medicaid. Both Medicaid and SSI are “need based’ and is therefore subject to strict asset limits.
…this is why disqualification from SSI benefits can happen if someone receives a lump sum of money or assets.
3 common ways to lose SSI benefits are…
- Inheritance or bequest (from an estate)
- Settlement in divorce (equitable distribution, alimony, child support)
- Personal injury settlement (or receipt of money from a judgment)
These 3 can be summarized as virtually any lump sum of money or assets; however, there are a few key things to know about the above.
First, if an SSI recipient is designated as the beneficiary of a last will or trust OR an insurance policy, he or she cannot simply refuse the benefits in order to remain qualified under SSI. Most people don’t realize that a “disclaimer” from the inheritance can jeopardize Medicaid. Similarly, disclaiming an inheritance can result in a penalty and disqualification for a penalty period concerning SSI benefits.
So, if someone is so designated under a will or trust AND is under age 65, there is only one real solution is someone wants to avoid the penalty, to be discussed…
Second, funds received such as unpaid child support, which are always viewed by the legal profession as for the benefit of children, are NOT exempt under the SSI rules and can thus can disqualify the SSI beneficiary.
Third, legal judgments that are paid in a lump sum, as they often are, will be highly prejudicial to the SSI beneficiary due to the asset limit. Thus, it may be advantageous to negotiate another payment structure; however, depending on the amount, a Florida special needs trust may offer a better solution.
Updates to Florida Special Needs Trust Law
For a Florida recipient of SSI benefits who is under the age of 65 and risks disqualification of penalties resulting from one of the above events, Florida special needs trusts can be huge solution.
There are some updated rules for setting up a special needs trust in Florida, as of 2016 and the new Special Needs Trust Fairness Act.
The federal congress originally decided that an individual who is under the age of 65 and is defined as “disabled” under the Social Security Act, could NOT set up a special needs trust on his or her own behalf. So the practice has since been to have the Florida special needs trust blessed (established) by the court. Another approach has been coordinate getting the trust set up through a parent, grandparent, or legal guardian.
With the enactment of the Special Needs Trust Fairness Act, a beneficiary of SSI can now set up a Florida special needs trust for themselves.
Inside insight…most people don’t know is that the U.S. Congress originally intended to allow the disabled person to set up the special needs trust on their own behalf BUT the necessary language was accidentally omitted in the law.
So, as of December 2017, they’ve corrected and updated the law to allow what we call a “self-settled” special needs trust in Florida. Your next question might be whether one still needs to be under the age of 65 to establish an individual special needs trust and the ANSWER is yes.
For those of you who like to peruse dusty law books:
OLD STATUTE, 42 USC 1396p(d)(4):
(4) This subsection [outlawing trusts for elders] shall not apply to any of the following trusts:
(A) A trust containing the assets of an individual under age 65 who is disabled (as defined in section 1614(a)(3)) and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this title.
(4) This subsection shall not apply to any of the following trusts:
(A) A trust containing the assets of an individual under age 65 who is disabled (as defined in section 1614(a)(3)) and which is established for the benefit of such individual by the individual, a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this title.
More inside insight…for an individual, Florida special needs trusts are not available for adults who are over the age of 65 because the way to prove a disability becomes more complicated when the adult is eligible for Medicaid. Depending upon the state laws, there are procedures in place to determine eligibility and a “Pooled Trust” is often used for people who are over age 65.
How to Set Up a Special Needs Trust in Florida
The legal agreement needed to establish a Florida special needs trust can be packaged as follows:
- Included in the Florida revocable living trust or a parent, grandparent or legal guardian of the individual; OR
- As a stand alone irrevocable trust document by the individual, a parent, grandparent or legal guardian of the individual or recipient.
An effective way to set up a special needs trust someone who under the age of 65 is in a revocable living trust IF you want certain assets to pass to the SSI recipient upon your death. In our recent post, we addressed this option as one of…7 key ways to use your Florida revocable living trust.
The reason that adding a Florida special needs trust to your Florida revocable living trust is a good option because the Florida special needs trust can be changed. With this strategy, the Florida special needs trust may also be revoked during the lifetime of the parent, grandparent or legal guardian (the “trustmaker”) AND can be updated to suit any changes in law. This approach also provides maximum flexibility upon the death of the trustmaker to assure that the SSI beneficiary is not disqualified from benefits. The revocable living trust language allows that the Florida special needs trust can also be updated to comply with any recent changes in the law in order to prevent disqualification.
Another option is to set up a stand-alone special needs trust in Florida and fund it immediately. As discussed, this can now be done by either the individual SSI beneficiary OR a parent, grandparent or legal guardian. It is important to keep in mind that if this kind of trust is set up, there may be tax consequences to the parent or grandparent due to “gifting” under the estate tax rules. The individual beneficiary may also face tax consequences due to the loss of what is called the “step up in basis”. This loss can occur if real property is received during lifetime of the granting person rather than upon their death.
Legal Requirements for Establishing a Florida Special Needs Trust
The trust language itself must follow the laws governing Florida special needs trusts. This language needs to direct how the trust assets are spent. Sometimes “less is more” when it comes to legal documents, so I’m not suggesting that a Florida special needs trust should be a lengthy and complicated document. It just needs to include the right stuff…so to speak.
With today’s legal requirements, the Florida special needs trust should meet a few minimal requirements as follows:
- The trust should be designed as a special needs trust pursuant to 42 U.S.C. Sec. 1396p (d)(4)(a) and that it is for a disabled person under age 65.
- That the intent of the trustmaker (settlor) is to allow eligibility for ongoing public assistance including SSI or Medicaid.
- That the intent is to “supplement” and NOT “supplant” public benefits.
- That distributions may be made in the trustee’s sole discretion for maintaining the quality of the beneficiary’s health, education, safety and welfare when they are not being provided by ongoing public assistance.
- That the trustee will repay all state Medicaid bills upon termination of the trust provided they may pay other estate expenses first.
Precautions for Administering a Florida Special Needs Trust
Penalties can occur if trust distributions are used to pay in kind” support for food and shelter items defined as 10 categories under the current rules as follows:
- Mortgage (including property insurance)
- Real property taxes
- Heating fuel
- Garbage removal
On the other hand, trust distributions may be used for non-food and shelter items with some flexibility. So, expenses may include and are not limited to things like such tuition, books, electronics, phone cable and internet expenses, vehicle expenses, and legal and trustee fees.
There you have it…a comprehensive overview of Florida special needs trusts a/k/a Florida supplemental needs trusts.
Remember, that the foregoing rules are subject to change in today’s volatile climate of healthcare and social services, particularly given a new incoming administration. So, I encourage you to stay tuned.
Steven Gibbs, Esq.
Hello, I am interested in establishing a Special Needs Trust for my disabled daughter, can you contact regarding scheduling an appointment.
Does the new language in 42usc 1396(p)(d)4 apply to the Medicaid liens of disabled people under 65 or just to SSI of those people. In other words, will a 62 yeqr old person’s self-funded special needs trust be safe from medicaid claw back or is this statute only good for protecting SSI?
For years I’ve been looking for a David finkelstein that I grew up
With in NY. Are you Him? Do you have a brother Wayne?
Hello, I am interested in establishing a Special Needs Trust for my mentally-challenged adult brother (52 years old).. We have no family left–it is just him and I. I am his sole caregiver. I am worried about him when it is my turn to go to Heaven. Can you contact me regarding scheduling an appointment. The only problem is you are in Ft. Myers and my brother and I live in Tampa, Florida. Maybe we could handle this over the phone and/or e-mail? Please let me know. Thanks!
Hi Tanya, I’ve asked our Legal Director Gene to reach out to you and schedule an initial conversation. Please feel free to call or e-mail firstname.lastname@example.org at your convenience as well.
Steve Gibbs, Esq.
Is it illegal to appoint a family member as trustee of a SNT, especially in view of the fact that there is a direct conflict of interest?
Hello Elizabeth, thanks for reading and your helpful question. In my experience, it isn’t “illegal” to appoint a family member to serve as trustee, yet it may (or may not be) a good idea depending on the circumstances. I’ve had cases where a family member was the perfect trustee due to the close relationship with the special needs beneficiary and other factors, such as the fact that the family member was well provided for and had no financial need for the trust assets. I should also mention that illegality refers to criminal conduct and trusts are generally civil matters. So, while fraud is criminally prohibited, the right to appoint a family member as trustee would not be presumably illegal. That said, these cases should be carefully considered on a case by case basis to prevent abuse and protect vulnerable adults.
Steve Gibbs, Esq.
If you establish a special needs trust can you latter move these assets to another special needs trust provider?
Hello Janet, your question actually raises a few additional questions that should be addressed in a consultation before answering such is what kind of special needs trust is it? How old is the beneficiary, etc.
Let us know if you’d like to take that next step. Best, Steve Gibbs
“5. That the trustee will repay all state Medicaid bills upon termination of the trust provided they may pay other estate expenses first.”
This stipulation is for 1st party SNTs (resources from the beneficiary), not for 3rd party SNTs (resources from a donor such as a parent or grandparent).
Correct and thank you for your comment Jim.
I had set up a irrevocable special needs trust agreement for my daughter. So when I die she will be taking care of but now she is going to die before me. Can I termination it or change the beneficiary to me thank
Hello Peter, I’m sorry to hear of your situation with your daughter. Typically, if that trust was set up irrevocably, upon her passing there would be beneficiaries designated in the trust and the assets would pass there. In general, because the trust is irrevocable, it is technically her property and can’t be terminated by you as Grantor, unless some provision was made for that, however, this would have jeopardized the irrevocability of the trust. Without looking at the trust, I can’t say more. I hope this offers bit of insight and you’re welcome to connect with us to schedule a discussion.
Steve Gibbs, Esq.
I have a irrevocable special needs trust(s) for my son who is on SSI. The trust was written in NY state when we were residents of NYS. We are now Florida residents, do we need to create a new trust?
Hello David, thanks for reading and your comment. The short would be potentially not; however, it would be best for you to get a consultation to make sure there is no reason that it would be helpful in your case. Feel free to reach out to Gene at email@example.com to set up a discussion.
Best, Steve Gibbs, Esq.
Hello I am a 62 year old healthy single professional and after reading info on your website may want to setup a special needs medical trust for myself. But the research I did tonight was on behalf of my 88 year old disabled mother who has $90K of assets and we want to make them non countable and apply for medicaid and a skilled nursing home application within the next 90 days. We plan to hire a Florida attorney within the next three weeks once we understand the strategic plan, engagement process. deliverables and fees. Paul
Hello Paul, thanks for reading and reaching out. There are certainly some ways to address your goals to creating a contingent special needs trust (within a revocable trust) for yourself as well as allocated your mother’s assets in a way that is advantageous for Medicaid qualification. As a first step, we are happy to schedule an initial confidential discussion with you to address your goals and concerns…the consult fee is $395 and is also applied toward the flat fee established for any services agreed upon. To start that process, you can e-mail Gene Ross at firstname.lastname@example.org or call our office at 239=415-7495.
Steve Gibbs, Esq.
How much does it cost to obtain a special needs trust I’m being granted like 8000$from the sale of our inheritance house
Hello Lori, thanks for inquiring. The market for this kind of trust in my experience is $3,000 – $5,000, so you’ll have to determine if it makes sense for you.
Best, Steve Gibbs, Esq.
Could I please schedule a phone appointment?
Currently, I am assisting a parent in establishing support options for a disabled adult child.
Hello April, you are always welcome to schedule an appointment by reaching out to Gene at email@example.com or calling our office at 239-415-7495. We will look forward to connecting with you soon.
Best, Steve Gibbs, Esq.
Very nice & informative blog…
In trying to digest the changes in the FL rules regarding irrevocable SNT, would it be fair to say that with my adult son, who is now qualified for Social Security and Medicare due to total disability, it would seem there would be very little need to use an SNT for his future financial well-being, and that an irrevocable living trust would do the job with more flexibility and much more simply?
Hello Wilson, thanks for your insightful comment. I believe you’re asking about a “revocable living” trust rather than “irrevocable” as generally living trusts and this kind of planning is done with revocable trusts. It could also be done in an irrevocable FL trust however so further clarification is needed. That being the case, the short answer without knowing all the details of your situation would that using the revocable trust with an SNT for your adult son probably offers the most flexible way to accomplish your stated goal. However, there are circumstances where a stand alone special needs trust would be preferred, either as an asset protection strategy for you to assure your son will be covered OR, and this is potentially big, covering him in the event of your disability (rather than death) because the revocable trust doesn’t kick in until the last trustmaker passes (typically). I encourage you to seek professional help as these are complicated matters and much more would need to be explored in a private consultation prior to offering any true guidance. However, I hope those details help you continue your education process.
Best, Steve Gibbs, Esq.
Curious to know the ball
Park cost of setting up a SNT
Hello Carolyn, the first question is whether you need an SNT and a number of questions need to be considered in a consultation setting to even begin to talk about pricing. The next question is whether we would prepare it as part of a revocable trust or as a stand alone trust. This also would impact pricing. Let us know if we can help.
Best, Steve Gibbs, Esq.
Hello Dr. Gibbs, ESQ,
I read a question about a person who lives in New York state, who has a special needs trust set up for him, but they’ll be moving to Florida. He asked you if it was necessary, once they establish their residency there, to rely on the new law from Florida without having to do anything or to establish a new special needs trust document created and executed in Florida. Your answer was on the spot.
So my question sprang from that Q & A. Although I live in New Jersey, my mother executed a special needs trust for me in 2003 in Florida. She passed in 2018. I don’t surmise, since I live in New Jersey, that the Florida law would apply to me. Besides, I have Medicare and SSDI, both of which are not means-tested. So any way you bake the cookie, it would be most advantageous for me to have the special-needs trust dissolved. I just turned 65. The reality of it is that the trust was created because back then I was abusing alcohol, but on September 11, 2021, I will, God willing, have 15 continuous years of total abstinence from -OH, and any other mind-altering substances. I’m still working on my sobriety, which has little to do with quitting, yet more with staying clean. Its definition has more to do with having clarity of mind. Is it the chicken or the egg sort of thing?
I must be going now, too busy preparing to file pleadings with the South Miami-Dade Civil Court-Coral Gables in Florida as the pro se plaintiff v. my brother for undue influence, and the Statutes of Limitations compels me to e-file my complaint by this coming Friday, April 23, 2021.
Thank you much for your contribution.
Very truly your,
Carlos A. Barrueco
PS Let me do all the worrying. I’m a jack of all trades and a master of only chess.
After all, when no attorney would take a medical malpractice case because the juice wasn’t worth the squeeze, I took on four of the top twenty law firms in the New York metropolitan area well past the end of discovery. I had a waiver on all fees. It lasted for twenty-two and one-half months, but six months before the judge ruled against me with prejudice I came down with ulcerative colitis whence I lost twenty-seven pounds, and immediately contracted Covid-19, missed two return dates, and asked for two consecutive adjournments- granted but was really in no shape to argue for and against motions filed by myself and the defense counsel, respectively. I truly believe there was an element of manifest injustice, especially notable with many apparent gaffs, as well as how I spoke and sounded. I would have settled for 40% less at $200,000.00 but I got them for what I believe to be close to twice that amount in billable hours, fees, and other expenses. I was both disappointed and delighted. My best friend is David Sanford, chairman of Sanford Heisler Sharp, LLP, nationally ranked. I can’t help but brag about him. I’m so proud. Not long ago, he suggested for me to go to law school. We’ll be seeing each other soon, If he antes up for the three years.
Hello Carlos, thanks for your comment and best to you in your legal pursuits.
Best, Steve Gibbs, Esq.
Hi, are the funds used to fund a 3rd party SNT considered exempt from countable assets for Medicaid purposes?
Hello Jay, in general, yes these funds used are not counted as an asset for Medicaid purposes if the trust is set up and administered properly. Generally these are submitted to the local social security office for approval if they are stand alone or if set up for a beneficiary following a person’s death. Let us know if we can help further.
Best, Steve Gibbs, Esq.
Hi, I have an already established third party SNT created in Pennsylvania with a separate federal TIN. The trust assets are investments only. I have houses in both Florida and Pennsylvania. Can I change the SNT address on the assets to Florida if the beneficiary is not considered a full time Florida resident? The intent is to become Florida residents but not in the near future. I would like to avoid Pennsylvania’s inheritance tax if possible. Thank you
Hello Sharon, the answer to your question depends on whether the trust allows a change of situs. However, you shouldn’t do this until the residency change is complete. Let us know if we can help.
Best, Steve Gibbs, Esq.
What part of 42 U.S.C. , what section says one cannot have over $2000 in countable assets (bank accounts and securities) to be eligible for ssi and medicaid?
Hello Frank, although I write for educational purposes about SSI, if you’re looking for concrete advice about countable assets, I encourage you to get a consultation with someone who regularly practices in SSI law. Although we do trusts, we tend to refer this kind of work.
Best, Steve Gibbs, Esq.
Can a SNT(1st party ) pay real estate taxes for the Florida resident beneficiary who is on SSI? There is no mortgage on the property which is the bene’s residence.
Hello Marianne, this isn’t a cut and dry answer in my opinion and may partially depend on how the trust is drafted and whether he is the only residence. I suggest paying an expert to do specific research and review the trust prior to acting on this.
Best, Steve Gibbs, Esq.
I am trying to get out of a special needs trust. I have no free benefits yet I was told when my trust was created the attorney only knew special needs and now moving to FL the attorney kept it that way to keep the money from me. I never have nor will get public help! The law firm is charging me 600.00 an hour when I was paying 2,000.00 a year max they seem to want to deplete the money and won’t talk through email or text only voice which I won’t do because I want the prod. They won’t provide me with detail spending. They go to HOA nettings at 600.00 an hour vs paying 40.00 fee. They know I am alone here so they don’t care. I am trapped in the hooks of a 6 location big firm. I wish I cld figure out a way to remove them and anyone from my money. Anyone know of a way?
Hello Michelle, my suggestion (offered for educational purposes only) is to ask for a copy of the trust and bring it to another firm for review to see if you can remove and appoint a new trustee and law firm. This isn’t something that we would do so you’ll need to find a firm that focuses on special needs law.
Best, Steve Gibbs for I&E
So no one ever addresses a circumstance if a beneficiary of a 1st party SNT is no longer disabled and working, so not qualifying for government benefits And not receiving any government benefits for 17 years now, can funds be disbursed from the SNT by Trustee to help beneficiary buy his own home?
If dispersing the funds is about Doing it in a way and for things that doesn’t disqualify them from government benefits because they don’t get them anymore can then can the trustee disperse them to their discretion for the beneficiary?
I’m very apprehensive to offer information in a blog post setting that could be understood to be advice. Also, I really don’t keep up on all of the SSI regs so you would need a consultation with someone who does this prior to making any trust administration decisions.
Best, Steve Gibbs, Esq.