A Special Needs Trust (SNT) protects assets for someone who is chronically ill or physically or mentally disabled so that they can remain eligible for public benefits while being able to inherit or draw income from a separate fund.
Various benefits like Supplemental Security Income, Medicare, Medicaid, or other programs provide monetary assistance for qualifying individuals who make below a certain amount. SNTs are set up so that the individual has a resource that does not belong to them, but that they can still draw from. A trust of this kind does not count as part of the individual’s assets, therefore they can qualify for financial assistance while still retaining a source of income. Generally, the funds have to be used for certain purposes, such as medical expenses, payments for caretakers, transportation costs, and other things that public benefits do not cover.
Having a protected source of income in a Special Needs Trust is incredibly beneficial for someone with a disability or chronic illness, where medical and living expenses are high but disability benefits can only go so far. It is important that the SNT gets established before the beneficiary turns 65 years old.
There are different kinds of SNTs that accomplish the same goals—supplying the individual with income while they remain eligible for public assistance—but in different ways. Additionally, the party who creates the SNT will designate someone to control it. That person will oversee the management of the trust and disburse the funds to the beneficiary.
The disabled or chronically ill person can put their own money into a first party SNT that they can draw from later. However, first party SNTs may be subject to Medicaid repayment rules, meaning that the money is still considered the individual’s and will be used to evaluate whether they qualify for financial assistance programs.
There are also third party SNTs, which are also called Supplemental Needs Trusts, which have funds that get put into the trust by someone else, such as the parents of the individual, which the disabled or chronically ill person draws from later. These funds are not subject to Medicaid repayment rules and do not effect the beneficiary’s eligibility for public benefits.
An SNT can be created as part of someone’s will or as a standalone. If the SNT is created under a Last Will and Testament or a Living Will, then the beneficiary cannot withdraw funds until the testator dies. If an SNT is created on its own and not part of someone else’s will, the beneficiary does not need to wait to withdraw funds. They are also designated as revocable or irrevocable, meaning that if the beneficiary has the power to revoke the trust, the assets will be considered available for Social Security and Medicaid purposes (remember, these programs consider the individual’s finances when deciding how many benefits they can award). If the SNT is irrevocable, the beneficiary cannot dissolve the trust and the assets cannot be seized by certain programs.
When setting up a Special Needs Trust or any kind of fund for yourself or a loved one, you should consult an attorney to draw up a valid legal document that will ensure that the trust has a clear directive and purpose. Seek out an attorney who has experience in trusts, estate planning, elder or disability law.
Various benefits like Supplemental Security Income, Medicare, Medicaid, or other programs provide monetary assistance for qualifying individuals who make below a certain amount. SNTs are set up so that the individual has a resource that does not belong to them, but that they can still draw from. A trust of this kind does not count as part of the individual’s assets, therefore they can qualify for financial assistance while still retaining a source of income. Generally, the funds have to be used for certain purposes, such as medical expenses, payments for caretakers, transportation costs, and other things that public benefits do not cover.
Having a protected source of income in a Special Needs Trust is incredibly beneficial for someone with a disability or chronic illness, where medical and living expenses are high but disability benefits can only go so far. It is important that the SNT gets established before the beneficiary turns 65 years old.
There are different kinds of SNTs that accomplish the same goals—supplying the individual with income while they remain eligible for public assistance—but in different ways. Additionally, the party who creates the SNT will designate someone to control it. That person will oversee the management of the trust and disburse the funds to the beneficiary.
The disabled or chronically ill person can put their own money into a first party SNT that they can draw from later. However, first party SNTs may be subject to Medicaid repayment rules, meaning that the money is still considered the individual’s and will be used to evaluate whether they qualify for financial assistance programs.
There are also third party SNTs, which are also called Supplemental Needs Trusts, which have funds that get put into the trust by someone else, such as the parents of the individual, which the disabled or chronically ill person draws from later. These funds are not subject to Medicaid repayment rules and do not effect the beneficiary’s eligibility for public benefits.
An SNT can be created as part of someone’s will or as a standalone. If the SNT is created under a Last Will and Testament or a Living Will, then the beneficiary cannot withdraw funds until the testator dies. If an SNT is created on its own and not part of someone else’s will, the beneficiary does not need to wait to withdraw funds. They are also designated as revocable or irrevocable, meaning that if the beneficiary has the power to revoke the trust, the assets will be considered available for Social Security and Medicaid purposes (remember, these programs consider the individual’s finances when deciding how many benefits they can award). If the SNT is irrevocable, the beneficiary cannot dissolve the trust and the assets cannot be seized by certain programs.
When setting up a Special Needs Trust or any kind of fund for yourself or a loved one, you should consult an attorney to draw up a valid legal document that will ensure that the trust has a clear directive and purpose. Seek out an attorney who has experience in trusts, estate planning, elder or disability law.
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