What is a Special Needs Trust (SNT)?
A Special Needs Trust is a way to enable a Trust beneficiary to have access to assets (money or property) without being disqualified from government assistance programs such as Social Security or Medicaid. A beneficiary with a disability, illness or injury may be able to benefit from the assistance of a Trustee in distributing assets from a Trust. As a note, you should consult with an attorney about a Special Needs Trust in your state.
In a First-Party Special Needs Trust, the assets that are put into the Trust belong to the beneficiary themselves. A First-Party Special Needs Trust may be a good option for people who have an unexpected injury or illness who need government assistance like Social Security or Medicaid but have too many assets to qualify. First-Party Special Needs Trusts may also be useful tools for those who are disabled and come into an unexpected amount of money or property and are afraid that those newly acquired assets would disqualify them from receiving benefits.
A Third-Party Special Needs Trust is funded by a third party rather than the beneficiary themselves. This third party is often a parent or other family member but could be any trusted adult. In a third-party Special Needs Trust, the person who has a disability can have somebody else providing funds for them without becoming ineligible for government assistance benefits. Sometimes, a third-party Special Needs Trust is set up within the Will or estate plan of a parent with a disabled child, so that the child will have that trust upon the death of the parent.
Rules of SNT
There are some rules when it comes to the management of a special needs trust. For example, disbursements must be made payable to a third party. This means that they cannot be written out to the beneficiary themselves and must go directly to the vendor or provider. All disbursements must be for the benefit of the beneficiary and their long-term interest. The trustee must keep good records of disbursements and provide receipts as requested. While these are general rules, you should consult an attorney prior to distributing any assets from a Special Needs Trust.
If you think a Special Needs Trust could benefit you or someone you love, please reach out to us to book a consultation.