Special Needs Trusts (SNT’s) come in several varieties. The primary purpose of all SNT’s is to hold assets for a beneficiary while exempting the contents of the SNT for programs like Medicaid, Supplemental Security Income (SSI), subsidized housing, food assistance and some other public benefits. Many of these programs have limitations on the value of assets the individual can have and still receive benefits. Using the “technical terms,” there are d4A, d4B and d4C Special Needs Trusts and there are 1st Party SNT’s and 3rd Party SNT’s…so we only left out the “2.”
Special Needs Trusts can help individuals with a disability of any age. SNT’s can help them qualify for programs to assist with medical and long term care expenses as well as possibly get a monthly income stream from Social Security, even when the individual may have never worked.
SNT’s are very powerful planning tools and are somewhat more complex to establish and administer than a typical will or revocable trust. There are many ways to mess up these trusts including: 1) having an improperly drafted document (faulty language used by the drafter) or 2) the trustee administers the trust improperly (making distributions or disbursements not permitted under the terms of the document or paying for things that adversely affect the beneficiary’s eligibility for programs).
Even well intentioned trustees can make mistakes in administration of a SNT and then there are the trustees that do not have good intentions. Preserving the limited funds for an individual with a disability is critical. Selection of a qualified trustee is imperative and you should hesitate before putting a family member in charge of one of these trusts without a good support network and professionals in place to advise them of their responsibilities.
If you have someone with medical bills that are out of control and has little or insufficient medical coverage you should think of a SNT. If you know someone who faces long term care, either in an institutional setting or out in the community, you should think of a SNT.
SNT’s are tools. They will work well for some individuals with a disability and possibly not for others. An Elder Law Attorney or Special Needs Lawyer can consider all of the tools and determine whether a SNT should be part of the solution to protect resources and to supplement public assistance programs. If you need help finding a qualified professional in your area we can help to connect you with attorneys who understand these unique estate planning tools.
Here is your cheat-sheet on the types of SNT’s.
SNT with beneficiary’s funds
|d4A – Under age 65, Medicaid payback, works for SSI and Medicaid, works for income and assets||d4B – Qualified Income Trust, only income deposited, only works for some Medicaid programs, not SSI||d4C – Pooled Trust, works for all ages for Medicaid but under age 65 for SSI, works for income and assets|
THIRD PARTYSNT with the funds of others
|Spouse can set up a trust under their will (must die), no Medicaid payback||Anybody other than the beneficiary or spouse can set up a stand-alone SNT, establish one upon death in a will or in a trust or participate in an existing SNT. No Medicaid payback, can go to others upon the death of the primary beneficiary|
By Travis D. Finchum, Esq.
Board Certified Elder Law Attorney
Special Needs Lawyers, PA
901 Chestnut Street, Suite C
Clearwater, FL 33756
tel: 727 443-7898 fax: 727 631-0970
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