Supplemental or Special Needs Trusts
Estate Planning at Laidlaw Firm
Supplemental or Special Needs Trusts (SNTs) are trusts used for disabled persons so that they have access to extra funds (such as an inheritance or a lawsuit award) without being disqualified from governmental benefits. At Laidlaw Firm, Attorneys at Law, PLLC, we provide clients with tailored assistance throughout the process of establishing an SNT. Contact us to schedule a free initial consultation to discuss your SNT needs.
This page discusses the following topics:
- Who's Eligible?
- What Can the Trust Pay For?
- Who Receives the Money at Death of the Disabled Person?
- First-Party Special Needs Trust/SNT
- Third-Party Special Needs Trust/SNT
- Pooled Special Needs Trust/SNT
- What Will Happen If I Don't Create a Trust for My Disabled Child?
1. Who's Eligibile?
Disabled Person: trust must be for benefit of a severely and persistently disabled person
- Disability determination by Supplementary Security Income will help meet this standard
- Medical records/Doctor's diagnosis will also suffice
- In most instances, proving disability is not an issue
2. What Can the Trust Pay For?
- Used for expenses not covered by government assistance, as that would jeopardize the disabled person's eligibility for that assistance
- Funds cannot be paid directly to disabled person, but must be paid to third parties
- Examples
- Enhanced medical or dental care
- Travel expenses of a relative to visit disabled person
- Computers
- Certain housing expenses not considered covered by government assistance such as telephone, cable TV, DVD/video players, paper products, laundry, cleaning supplies and home repairs
- Capital Improvements, subject to certain limits
3. Who Receives the Money at Death of the Disabled Person?
This is a complicated question which shows the importance of acting today to plan for a disabled child
4. First-Party Special Needs Trust/SNT
This type of trust is created with funds of the disabled person - either income or assets - such as an inheritance not received through an SNT, a legal award from a personal injury case or an income stream.
- Government must be named as beneficiary
- Government must first be reimbursed for ALL costs of care before money is distributed to anyone else
- These are also known as Government Pay-Back trusts
Legal Barriers to Creation:
- Must be created and funded before the beneficiary turns 65
- Can only be created by a parent, legal guardian or grandparent of the disabled person or by a court
5. Third-Pary Special Needs Trust/SNT
This is an SNT created with funds of someone other than the disabled person or someone legally obligated to care for them (a spouse or a parent of a minor child).
- The creator of the trust chooses the remainder beneficiary at the time of trust creation (the person to receive the trust funds upon the death of the disabled person)
- The government does not have any claim to the funds as long as the trust has been administered properly
6. Pooled Special-Needs Trust/SNT
- Trust created and operated by a non-profit agency
- May be funded with the disabled person's own funds - either assets or income
- Beneficial for saving the Medicaid Spend-Down requirement if disabled person is over 65 and not eligible to create a 1st Party SNT
- At the death of the beneficiary, remaining funds are retained by the pooled trust for the benefit of disabled beneficiaries
7. What Will Happen If I Don't Create a Trust for My Disabled Child or Relative?
- Your child may be disqualified from benefits, unless they create a First Party Special Needs Trust
- First Party Special Needs Trusts can cost more to create and administer because may require court approval and possibly also a guardianship proceeding
- First Party Special Needs Trust government payback provisions will apply
- If you want to set aside money to provide for a disabled child or relative, and have any money remaining pass according to your wishes and not to the government, then you must act today to establish a Third Party Special Needs Trust