Can I Use a Special Needs Trust?
A special needs trust (an “SNT”) is a legal arrangement and fiduciary relationship that lets a physically or mentally disabled or chronically ill person get income without reducing their eligibility for the public assistance disability benefits provided by Social Security, Supplemental Security Income (SSI), or Medicaid.
Investopedia’s recent article entitled “What Is a Special Needs Trust?” says that a grantor creates a trust, and a trustee oversees the disbursement of assets from the trust. The beneficiary is a person for whose benefit the trust is created. The trust will supplement the beneficiary’s government benefits but won’t replace them.
An SNT helps cover a disabled individual’s financial needs that aren’t covered by public assistance payments. The assets held in the SNT don’t count toward public assistance eligibility.
The proceeds from this type of trust are typically used for medical expenses, caretaker expenses and transportation costs. The person who creates the SNT (the settlor) names a trustee who will have control over the trust. The trustee will also oversee its management and the disbursement of funds.
The SNT is funded with assets belonging to a person other than the beneficiary, and funds belonging to the beneficiary can’t be used to fund the SNT. Funding may come from gifts, an inheritance and proceeds of life insurance policies.
Assets originally belonging to the disabled individual placed into the trust may be subject to Medicaid’s repayment rules, but assets provided by third parties such as parents aren’t.
SNTs are irrevocable and can’t be tapped by creditors via a lawsuit.
A SNT can have benefits for both parties. The beneficiary gets financial support without putting their eligibility for income-restricted programs or services in jeopardy.
The person or party that contributes to the SNT is assured that the proceeds will go to expenses they stipulate.
The grantor or their legal representative must define the terms of the trust documents very carefully to ensure their validity and to confirm that the directives and purpose of the document are explicitly clear.
If you want to explore creating a special needs or supplemental benefits trust, speak with an experienced elder law attorney.
BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.
If you liked this article, “What is a Special Needs Trust?” read also these additional articles: How to Plan in a Time of Uncertainty and Can You Leave an IRA to a Beneficiary? and What Is the Purpose of a Exemption Trust? and Did Former NFL Tackle and Fox Sports Commentator Tony Siragusa have an Estate Plan?
Reference: Investopedia (July 12, 2022) “What Is a Special Needs Trust?”
