Updated: Oct 6, 2022
What is a special needs trust?
A special needs trust (SNT), sometimes referred to as a supplemental needs trust, is a legal vehicle enabling assets to be held on behalf of someone with disabilities without affecting their eligibility for means-tested public benefits such as Medicaid or Supplemental Security Income.
What responsibilities does a trustee have?
Administering a special needs trust is considerably more complicated than managing most other trusts. The trustee is responsible for investing funds, making disbursements, paying taxes and maintaining detailed accounts. This requires an understanding of government programs, including strict regulations concerning the use of SNT assets, since improper use of funds can disqualify the beneficiary for important means-tested public benefits. In addition to handling these technical requirements, the trustee should have a deep appreciation for the beneficiary’s needs and desires so that the trust will make the best possible contribution to the individual’s quality of life.
Are there different types of Special Needs Trusts?
Yes, there are several different types of Special Needs Trust and one the most significant distinguishing factors is whose money funds the trust. A first party or self –settled, Special Needs Trust is created with assets belonging to an individual with disabilities who becomes the beneficiary. The person must be under the age of 65 at the time the trust is established and funded. While these funds may be used for the disabled persons benefit during their lifetime and funds remaining in the trust at the beneficiary’s death must be used to reimburse Medicaid for services to that individual before the can be distributed to anyone else.
What if the trust is funded with money from parents or other relatives?
This would be considered a third party trust. One created with funds during the life of the originator is a living or inter vivos trust and one created as part of a last will and testament is considered testamentary. Upon the beneficiary’s death there is no requirement to use residual funds to reimburse Medicaid for services provided to the individual and the remainder beneficiary may be named o receive those assets.
When should a special needs trust be considered as a vehicle for holding the proceeds from a personal injury settlement?
If the plaintiff will need means-tested public benefits such as Medicaid (including Medicaid waiver programs), Supplemental Security Income (SSI), SNAP (food stamps) or Section 8 Housing, the settlement should be held by a special needs trust in order to preserve their eligibility. Even a very large settlement can be quickly dissipated, given the high costs of care, and protecting assets in this manner can significantly contribute to the individual’s long-term financial security.
Questions about Special Needs Trusts? Give Takacs McGinnis Elder Care Law at 615.824.2571.