Special Needs Trust
Special Needs Trust (SNT) is a generic term commonly used to describe trust funds created to supplement the government benefits received by the beneficiary. By maintaining a beneficiary’s eligibility for government benefits, the pool of assets available for the care of the beneficiary becomes significantly broader and deeper and lasts for a longer period of time. Generally, if a client is asking whether an existing trust qualifies as a special needs trust, they are really asking if the trust will work to protect the beneficiary’s eligibility for need-based public benefits. The answer is often dependent on state law.
Someone may be prompted to establish a SNT for a number of reasons. These are the most common situations:
The goal of the SNT is almost always to ensure that that the beneficiary will not experience a lapse in eligibility for benefits or a reduction of benefits already being received, and to avoid the imposition of a penalty period for an improper transfer upon seeking initial eligibility for benefits. Another important purpose of the SNT, especially in the estate planning situation, is to ensure a pool of funds to pay for advocacy and care management to the beneficiary over time.
Special needs trusts can be living trusts or testamentary trust funds and may be either self-settled or created by a third party. In general, a SNT should be irrevocable, unless it is a third-party trust and the grantor is still living. A trust that is revocable by the grantor/beneficiary will be viewed as an available resource.
Either type of trust may be drafted as a trigger trust and the trust may not start out as a SNT, but the happening of a particular event, such as the beneficiary’s need for Medicaid, may cause the trust to turn into a SNT. Whether or not a trigger trust is effective depends on your state law. The type of trust used depends upon whose money will fund the trust and the age and circumstances of the individual with a disability.