What is a Special Needs Trust in Florida?

Attorney Robert Hidock: Tom, let's say somebody was on disability, on Medicaid, but they were under 65. We could create what was called a irrevocable special needs trust for the disabled. It's typically a first party trust where the person that's on Medicaid is the person creating it. With that, they have the pleasure of appointing a trustee. The trustee takes care of all their finances. The state is a beneficiary for recovery on that one, but the person gets to keep all the money, keep all the proceeds, and the trustee can spend that money however they want for their loved ones.

Attorney Tom Olsen: We set up the special needs trust. The settlement money goes into the special needs trust. The family manages on behalf of the nursing home resident. They're using it for supplemental things like gifts and cell phone and TV, whatever might be needed?

Robert: Exactly.

Tom: Exactly. Also, the special needs trust says that someday when the nursing home resident does pass away, whatever's left over is going to be used to reimburse the state of Florida.

Robert: The state of Florida. When people are very proactive in planning, like you are, Tom, with the state planning. Let's say a husband and wife come, and they have a disabled child that's on disability, and on Medicaid. At that point, you can create a revocable trust for the family with a special needs trust incorporated in that language. That will allow for them not to have the state as the beneficiary. They can have their normal beneficiary chain, because they've planned it in advance. When you're doing your estate plan, you can save them a lot of trouble down the road.

Tom: They're both called a special needs trust. In one situation, it's required that when the person who's got the benefit of this money passes away, that money has to go reimburse state of Florida for the nursing home expenses. The other one would say that when the person that has the benefit of the money passes away, you can dictate what happens to that money, including going to your other children.

Robert: Absolutely. With the trust that you're doing at the estate planning level, that can be a revocable trust, but when we get to the Medicaid level, that has to be an irrevocable trust.

Tom: Yes. Two types of special needs trust. They both have the same exact name, but they serve different purposes. The one that we do really quite often for people is a parent that has a child that is on disability. That's where we're going to-- If we were to leave that parent's wealth to that child outright, that child's disability would end, and so we've put that child's money instead into a special needs trust.

Robert: That is the perfect thing to do.

Tom: They get to keep their disability.

Robert: Absolutely.

Tom: Yes. Now, people might say, "Well, the disability payments are only, I don't know, a few hundred dollars a month." One of the real benefits of being on disability is, is that you get Medicaid.

Robert: Yes.

Tom: You get all your healthcare is taken care of. That's where the real value can be.

Robert: Especially because you have to think, if they're young, when they're on Medicaid, and recovery, let's say they're not at a skilled nursing facility, the recovery is not as great, but over a period of years, the expense that Medicaid pays out is a great deal. If they can protect it, and then God forbid, when that loved one passes, it can go to their other children. It just continues to go on. It doesn't end and go, "I'll go to the state of Florida for recovery."

Tom: Robert, I guess I'm surprised pretty often about how many parents we meet with that do have a child on disability. Whether they've gotten hurt somewhere down the road before, or other kinds of issues that would cause them to be entitled to disability.

Robert: Yes, it really is, because if-- Most, that's not the norm, right? You're not thinking about it. A lot of times in our interviews with clients, we have to be proactive.

Speaker 3: Caller Phil.

Robert: Do you have a child that has a disability or special needs so we can do the proper planning?