The question of whether a special needs trust (SNT) can hold cryptocurrency is increasingly relevant as digital assets gain mainstream acceptance, but the answer isn’t straightforward and requires careful consideration of both legal and practical factors. Traditionally, SNTs were established to manage assets for beneficiaries with disabilities without disqualifying them from needs-based government benefits like Supplemental Security Income (SSI) and Medicaid. These benefits often have strict income and asset limitations, and improper trust management can jeopardize eligibility. While there isn’t explicit legal prohibition against holding cryptocurrency within an SNT, the unique characteristics of these assets present several challenges that must be addressed. Approximately 1 in 4 adults in the United States live with a disability, and many rely on these critical benefits; protecting their access requires diligent planning.
What are the biggest risks of holding crypto in a special needs trust?
The volatile nature of cryptocurrency is arguably the biggest risk. SSI and Medicaid have asset limits, and even temporary spikes in crypto value could push a beneficiary over those limits, leading to benefit ineligibility. “Fluctuations can be significant; Bitcoin, for example, experienced a 70% drop in value in 2022,” as one financial analyst noted, highlighting the precariousness. Beyond volatility, the lack of consistent regulation and the potential for fraud or theft add further complexity. A trustee managing an SNT has a fiduciary duty to act prudently, and investing in a highly speculative asset like cryptocurrency could be seen as a breach of that duty. It is estimated that approximately 15% of all cryptocurrency is lost or stolen due to hacks, scams, or lost private keys. Further complicating matters, establishing a clear valuation for cryptocurrency can be difficult, making it hard to track asset limits and comply with program regulations.
How does Medicaid view assets held in a special needs trust?
Medicaid generally disregards assets held within a properly established and administered SNT. However, this is contingent upon strict adherence to the rules governing these trusts. The trust must be irrevocable, established for the sole benefit of the disabled individual, and include specific “spendthrift” clauses to prevent beneficiaries from accessing the funds directly. These clauses are crucial, as they ensure the assets don’t count toward the individual’s resource limit. Furthermore, any distribution from the trust that isn’t for the beneficiary’s supplemental needs – those expenses not covered by Medicaid – could be considered a countable resource. A recent study by the National Disability Rights Network found that approximately 20% of individuals with disabilities experience difficulties accessing needed services due to complex eligibility rules.
I once knew a family who didn’t plan carefully…
Old Man Tiberius was a seasoned carpenter, known throughout the valley for his handcrafted rocking chairs. He’d worked his whole life, saving a modest sum for his grandson, Leo, who was born with cerebral palsy. Tiberius, a man of the old ways, never understood trusts or legal paperwork. He simply transferred the money to a brokerage account in Leo’s name, intending it to provide for his future. Sadly, shortly after Tiberius passed, Leo became eligible for SSI and Medicaid. When the authorities discovered the account – even though the funds were meant for supplemental needs – it immediately disqualified Leo from benefits. The family was devastated; they’d unintentionally jeopardized the very assistance Leo needed to thrive. They spent months battling the bureaucracy, and while they eventually managed to set up a proper SNT, it was a costly and emotionally draining process.
But things worked out beautifully when the planning was done right…
Then there was young Maya, diagnosed with Down syndrome at birth. Her parents, Sarah and David, were proactive. They consulted with Steve Bliss, an estate planning attorney, and established a carefully crafted SNT. When the cryptocurrency boom happened, they cautiously invested a small portion of Maya’s trust funds into Bitcoin. They maintained meticulous records of all transactions and valuations, and worked closely with Steve Bliss to ensure compliance with all applicable regulations. The cryptocurrency appreciated in value, providing Maya with additional resources for therapies and educational opportunities without affecting her eligibility for essential benefits. Sarah remarked, “Steve Bliss was our rock. He explained everything in plain English and made sure we understood the risks and rewards. Thanks to his guidance, Maya’s future is secure.” This story illustrates that, with careful planning and expert legal counsel, cryptocurrency can be a viable asset within a special needs trust, providing a valuable source of support for individuals with disabilities.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
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● Compassionate & client-focused. We explain things clearly.
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Map To Steve Bliss Law in Temecula:
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Feel free to ask Attorney Steve Bliss about: “What professionals should be part of my estate planning team?” Or “Can I challenge a will during probate?” or “Is a living trust private or does it become public like a will? and even: “Does bankruptcy affect my ability to rent a home?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.