Special Needs Trusts

Supplemental Needs Trusts

Assets left to disabled beneficiaries can disqualify them from benefits received from state and federal entitlement programs (such as Medicaid and Supplemental Security Income).
In the past, families would often disinherit disabled children and leave assets to someone else who agreed to take care of them.

In 1993, Congress enacted new laws that entitled disabled beneficiaries to derive the same estate planning benefits as non-disabled beneficiaries without affecting their eligibility for state and federal benefits. The law permitted the creation of Supplemental Needs Trusts (SNTs) which enable you to leave any amount of money to loved ones with special needs without affecting their eligibility for state and federal benefits.
The law further provides that the trust proceeds may be used to provide luxuries for the disabled individual which the state and federal programs do not provide. Luxuries can include trips, computers, televisions, power wheelchairs, prosthetics and other comforts.

Supplemental Needs Trusts can be created by disabled individuals with their own funds or by third parties, typically parents or relatives, with their own funds. There are different rights and restrictions to each of these trusts, but both ensure immediate qualification for federal and state benefits while providing luxuries which disabled beneficiaries would otherwise be unable to receive.

How Does an SNT Work?

The beneficiary or guardian asks the trustee to make a distribution. If the trustee determines that the requested distribution is permitted and is in the best interests of the beneficiary, then the trustee pays for the goods and/ or services directly from the trust account to the vendor or provider. It is important that the money never be paid directly to the beneficiary, as that will cause a reduction of SSI benefits or a total loss of Medicaid benefits. It is important to carefully choose the right trustee and to consider appointing a trust protector should the laws change.

Guardianships for Special Needs Children

Parents are considered the “natural guardians” of special needs children with the right to make all decisions for them. However, such rights do not permit parents to have access to or control over their children’s assets (i.e., proceeds from a lawsuit or gifts from family members). In addition, when children turn eighteen, parents lose their rights as natural guardians and the ability to make health care and other life decisions.