Understanding a special needs trust in Wisconsin

On Behalf of | Mar 20, 2020 | Uncategorized |

Many Wisconsin families with special needs children or adults wonder what will happen to the special needs person after they die, especially if they will leave an estate worth more than $2000. Beneficiaries of estates with assets greater than $2000 are not eligible for Medicaid or Supplemental Security Income. Fortunately, the state of Wisconsin and the federal congress have created a valuable estate planning tool for this situation. The tool is called a “special needs trust,” and it comes in two flavors: a self-funded trust and a third-party trust.

Both types of trust are pooled asset trusts; that is, all assets placed in special needs trusts in Wisconsin administered by an organization known as Wispact. A self-funded trust is comprised of assets provided by the disabled person or the person’s family. Third-party trusts include assets provided by third-parties. Assets placed in a special needs trust are not counted against the income and asset limitations of Medicaid. A special needs trust must be created for the benefit of an adult or child whose physical or mental condition satisfies the definition of “fully disabled” under the Social Security Act. The funds placed in the special needs must be spent for the exclusive benefit of the designated beneficiary.

Wispact takes possession of all contributions to special needs trusts and ensures that the trusts are run according to state and federal law. Wispact has retained the services of Capital First Trust Company in Milwaukee to ensure that trust assets are properly invested and paid out according to state and federal regulations. When a beneficiary needs money from the trust to pay a medical bill, the beneficiary sends a Request for Distribution to Wispact. Wispact reviews the RFD and sends it to the trustee for payment if the purpose falls within the types of approved expenses.

A special needs trust has two essential benefits: it paves the way for the beneficiary to receive Medicaid benefits, and by pooling assets, a special needs trust is able to maximize its investment leverage. Anyone interested in exploring the benefits of a special needs trust should contact an experienced estate planning attorney.