WHAT IS A SPECIAL NEEDS

TRUST IN

NORTH DAKOTA?

What is a Special Needs Trust in North Dakota? www.germanlawgroup.com 2

There is no

universally

applicable

estate plan.

The correct

course of

action is

going to vary

on a case-by-

case basis.

This is why

you should discuss everything in detail with a licensed estate planning attorney

before you make any assumptions.

People who make decisions without knowledge of all of the facts often leave

behind messy situations for their loved ones. With this in mind, we will look at

special needs trusts in this paper.

MEDICAID AND SUPPLEMENTAL SECURITY INCOME

You may have a person with special needs in your family, and you may want to

provide for this loved one in your estate plan. This is great, but you should be

aware of the rules and regulations that govern need-based benefit programs.

What is a Special Needs Trust in North Dakota? www.germanlawgroup.com 3

Many people with disabilities require care and treatment that can cost millions of

dollars over the course of a lifetime. Health insurance is important for everyone,

but for these individuals, coverage is an absolute must.

Medicaid is a government health insurance program that is jointly administered

by the federal government along with each respective state government. To

qualify, you must be able to prove that you have very limited financial resources.

People with disabilities who are incapable of earning much income typically

qualify for Medicaid coverage.

What is a Special Needs Trust in North Dakota? www.germanlawgroup.com 4

Supplemental Security Income is also relied upon by a significant percentage of

people with special needs. As the name would imply, this program provides an

ongoing source of income. You must meet the eligibility requirements with

regard to limited assets if you want to qualify for SSI.

Someone who is qualified for Medicaid and SSI is not necessarily going to retain

eligibility forever. A change in financial status can render a benefit recipient

ineligible.

This is something to keep in mind when you are planning your estate.

What is a Special Needs Trust in North Dakota? www.germanlawgroup.com 5

SPECIAL NEEDS TRUSTS

Now that we have provided the necessary background information about

government benefit programs, we can look at the value of special needs trusts.

When you fund a special needs trust for the benefit of a loved one with a

disability, it is considered to be a third party special needs trust. This is because

the assets that are

being used to fund the

trust are coming from

a third party. They are

not coming from the

beneficiary.

You name a trustee

when you create the

trust agreement. The

trustee administers the

trust, and the beneficiary cannot direct the actions of the trust or directly utilize

funds that have been conveyed into the trust.

However, the trustee can use assets in the trust to satisfy the supplemental

needs of the beneficiary without impacting government benefit eligibility. These

would be needs that are not being paid for by government benefits.

When a third party special needs trust is in place, the Medicaid program would

not seek reimbursement for monies spent from the beneficiary's estate after his

or her death.

What is a Special Needs Trust in North Dakota? www.germanlawgroup.com 6

There is another type of special needs trust called a self-settled or first party

special needs trust. This type of trust is funded with the beneficiary's own

money.

The trustee could use assets in the trust to meet the supplemental needs of the

beneficiary without impacting government benefit eligibility throughout the

beneficiary's life. However, after the death of the beneficiary, Medicaid would

seek recovery from the beneficiary's estate.

What is a Special Needs Trust in North Dakota? www.germanlawgroup.com 7

SUMMARY

People with special needs are often enrolled in the Medicaid program and the

Supplemental Security Income program. These programs are only available to

people who can prove that they have significant financial need.

A direct inheritance could render a benefit recipient ineligible for ongoing

coverage.

To account for this dynamic, you could make a loved one with a disability the

beneficiary of a special needs trust. Under program rules, the trustee could use

the assets in the trust to improve the beneficiary's quality of life. These

expenditures would not jeopardize benefit eligibility.

If you would like to discuss special needs planning with a professional, schedule

a consultation with a licensed estate planning attorney. Your attorney will

become apprised of your situation, answer all of your questions, and help you

put a plan in place if you decide to go forward.

What is a Special Needs Trust in North Dakota? www.germanlawgroup.com 8

REFERENCES

American Bar Association

http://www.americanbar.org/newsletter/publications/law_trends_news_practice_area_e_newsletter_home/0501_estate_financialplanning.html National Alliance on Mental Health http://www.nami.org/Content/NavigationMenu/Find_Support/Legal_Support/Spe

cial_Needs_Estate_Planning/Special_Needs_Trust_Primer.htm Nolo http://www.nolo.com/legal-encyclopedia/using-special-needs-trust-when-you-have-too-many-assets-medicaid.html

What is a Special Needs Trust in North Dakota? www.germanlawgroup.com 9

About the Author

Raymond J. German

As an attorney in Minnesota and North Dakota, Raymond

J. German provides a wide range of estate planning

services to his clients, with a primary focus on helping

them provide for the security of their loved ones, reduce

estate taxes and avoid or at least minimize the costs and

delays of probate, all with a well-crafted estate plan. Mr.

German defines the mission statement for German Law

Group, PC, as "Helping one family at a time pass on

values, beliefs and finances, which can be shared for

generations to come." Mr. German is well aware of the

growing importance of estate planning and dedicates himself to informing the

public of the need for careful attention to their specific situations. He is a

frequent speaker on a variety of estate planning topics, regularly presenting

educational seminars for the public as well as private groups.

Raymond J. German approaches each challenge with not just solid expertise, but

also remarkable enthusiasm and vigor. By constantly seeking simpler, better, and

more effective ways of doing things, he continues to make a real difference in

the lives of families and on the way estate planning is practiced by attorneys

around the country.

German Law Group, PC

www.GermanLawGroup.com

GRAND FORKS

2650 32nd Avenue South, Suite O

Grand Forks, ND 58201

Phone: (701) 738-0060

Toll Free: (800) 774-7576

Fax: (701) 738-0064