Are you disabled and wondering how your assets will impact your eligibility for public benefits? Or are you the parent or guardian of a loved one with special needs and want to ensure your estate plan doesn’t interfere with their access to Medicaid and other government assistance? Creating a special needs trust (SNT) in Arizona can resolve these issues and give you peace of mind that provisions are in place to enhance your or your child’s quality of life while preserving valuable assets.

Individuals with physical or mental disabilities can benefit from state and federal programs like Medicaid and Supplemental Security Income (SSI). However, those programs have strict income thresholds that must be met to qualify. Through careful special needs planning, you can avoid potential hang-ups that result in denials or disqualifications.

At Pennington Law, PLLC, we can discuss how establishing a special needs trust can protect you or your loved one and develop a strategy that protects your interests and future. Contact us today to speak with an experienced special needs planning attorney.

What is a Special Needs Trust?

A special needs trust (or supplemental needs trust) is a trust designed to benefit individuals with disabilities. One of the purposes of the trust must be to enable the beneficiary to qualify or continue to qualify for public benefits like Medicaid (in Arizona, called AHCCCS), the Arizona Long-Term Care System (ACLTS), and Supplemental Security Income (SSI).

For many government programs, eligibility is determined by meeting specific income and asset criteria. Too many assets could disqualify an applicant from receiving essential benefits. For example, a personal injury settlement, inheritance, or gift could push the individual over the threshold, leading to a denial. With a properly drafted special needs trust, you can set aside money so it won’t be counted as income on government assistance applications.

The person who creates the SNT must appoint a trustee to manage it. The trustee must adhere to the requirements set by the trust documents and follow all Arizona reporting requirements.

Why Consider a Special Needs Trust?

Special needs trusts are not intended to cover basic needs like food and shelter. Instead, the money in these trusts must be used to enrich the beneficiary’s quality of life. For example, SNT funds could be used for a beneficiary’s:

• Education, such as tuition and fees for college or vocational training
• Clothing, furnishings, and other essentials
• Specialized medical care not covered by AHCCCS
• Travel and recreation
• Personal care
• Entertainment
• Home repairs
• Television, computer, Internet, and phone
• Transportation
• Activities
• Care management
• Trust administration fees
• Guardianship costs

A properly executed SNT in Arizona provides other advantages, such as shielding the assets in the trust from creditor claims, lawsuits, or if the beneficiary goes through a divorce. These perks can leave you confident that money will be there when you or your child needs it.

Types of Special Needs Trusts

Arizona has multiple types of special needs trusts:

• First-party SNT – A first-party special needs trust is funded by the disabled person’s own assets. The disabled beneficiary, a court-appointed guardian, parent, grandparent, or the court must create the SNT before the individual reaches age 65. These trusts also include a Medicaid payback provision upon the beneficiary’s death.

• Third-party SNT – A third-party SNT is funded through someone else’s assets. For example, a parent may create a special needs trust as part of their estate plan to provide their child with financial security once they are gone. However, anyone else can establish a third-party SNT except for the beneficiary. There is no age or Medicaid payback requirement with a third-party special needs trust.

Establishing a Special Needs Trust in Arizona

The requirements for establishing an Arizona special needs trust can be complex. An experienced special needs trust lawyer or estate planning attorney can help you draft a trust document that protects the beneficiary’s access to public benefits without risking their eligibility.

Both first-party trusts and third-party trusts are governed by specific rules, and trustees must fulfill various complex duties. Your lawyer can assist in drafting the SNT, advise you on selecting a trustee, and explain the responsibilities to the potential trustee so they understand their expectations.

It’s also essential to understand the parameters and limitations of each type of special needs trust. Some are more restrictive than others, and a lawyer can educate you on what to expect from your SNT.

Choosing a Trustee for Your SNT

Selecting a trustee for your SNT is one of the most important decisions you will make. When you set up a trust, you transfer control of your assets to the trustee, who manages them, makes disbursements, and fulfills their duties to the beneficiary in compliance with laws and regulations. Clearly, you need someone you trust. But who?

A good special needs trustee should:

• Know the beneficiary well – For example, a person with a traumatic brain injury needs a trustee who understands how the impairment specifically affects their life. That doesn’t mean you need a doctor to serve as trustee. However, the beneficiary would get the best support by having a trustee who knows their capacity and how to navigate a complex relationship.

• Be willing to ask for help – Managing a trust is not just pleasure. It’s work. You need someone who will invest the time and energy into understanding the rules for Medicaid, Social Security, and their fiduciary duties. You also need someone humble enough to seek guidance from a special needs trust lawyer or trust protector if questions arise.

• You want a trustee who will be with you or your beneficiary for the long haul. By selecting someone close in age, you have a better chance of having the same trustee manage the trust while the beneficiary is alive.

• Consider a professional – Not sure if you have a qualified friend or family member to serve as trustee? Professionals and corporate entities, such as lawyers, accountants, trust companies, and banks, are alternative options to manage your SNT.

Talk to an AZ Special Needs Trust Attorney Today

Preparing for the future is crucial if you or a family member has a disability. A special needs trust can be a valuable tool to provide financial security without compromising access to essential public aid. But the rules are complicated, so seeking legal assistance is wise. Call or contact Pennington Law, PLLC today for advice from a skilled Arizona attorney.