Category: SSDI

SNT can be a Vital Tool for Families

SNT can be a Vital Tool for Families

A special needs trust, or SNT, can be a vital tool for families. It is an important part of planning for the financial security and lifestyle of a family member with special needs. A special needs trust can allow the trust’s beneficiary to receive financial support from the family for supplemental needs without losing public benefits, such as SSI (Supplemental Security Income) and Medicaid. A recent article from The Westerly Sun, “Special needs trust could ease families’ stress,” explains how this works.

A parent typically has the special needs trust created. As the grantor, the parent establishes the trust and names a trustee who will be responsible for managing the trust. The trust may be funded with gifts throughout the parent’s lifetime or from other sources, such as a court settlement or an inheritance.

Life insurance proceeds are often used as the funding mechanism. The trust purchases a life insurance policy on the life of one or both parents of a special needs individual. Government benefits are protected as long as the trust is named the policy beneficiary.

The role of a trustee is important in a special needs trust. They must manage the funds within the trust and ensure that they are only used to supplement SSI and Medicaid, the two government programs that typically cover the costs of housing, food, and medical care. The special needs trust can be used for other qualified expenses, including transportation, travel, education, entertainment, professional services, and personal items.

The parent could serve as a trustee, or a trusted friend or relative may be named. Whoever is chosen as the trustee should be familiar with the family and the needs of the family member with disabilities. You also want to name a person who is competent at managing finances and can be trusted to stay current regarding SSI and Medicaid regulations.

Another option is to hire a professional trust company to manage the special needs trust. This type of company is experienced in both asset management and government regulations and would provide parents with strict recordkeeping of all financial transactions associated with the trust.

Parents should also be familiar with areas of concern about special needs trusts. The trustee controls how and when funds are distributed, which can frustrate beneficiaries if requests for funds are denied.

While third-party special needs trusts are funded by someone other than the beneficiary, the beneficiary’s own assets fund first-party special needs trusts. The trust must pay back Medicaid for money used for the beneficiary after the beneficiary’s death. This repayment could deplete the trust, depriving secondary beneficiaries of any funds they might otherwise receive. Third-party trusts do not require Medicaid repayment.

An SNT can be a vital tool for families, but only if it is properly structured. Speak with an experienced estate planning attorney before establishing a special needs trust to be sure that this is the right solution for your family’s situation. If you would like to learn more about special needs and elder law planning, please visit our previous posts. 

Reference: The Westerly Sun (June 10, 2023) “Special needs trust could ease families’ stress”

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There is Great Value in Special Needs Trust

There is Great Value in Special Needs Trust

Parents with children who have special needs know they play a pivotal role in their child’s medical, social, emotional and mental health. They also face the challenges of figuring out government assistance programs like Medicaid and how these and other programs provide much-needed help throughout a child’s life. Another important way that parents of children with special needs help is with the creation of a special needs trust, as explained in the article “Special Needs Trust (SNT): What It Is and How It Works” from Forbes. There is great value in a special needs trust.

A special needs trust is used to hold assets in an account to be used to support an individual with special needs. The funds belong to the trust and not the individual, so they are not factored into their eligibility for government benefits.

SNTs are typically set up by a parent, grandparent, or guardian. The person who sets up the account, called the “grantor,” funds the account, as may any other individuals who wish to provide for the child.

The grantor names a trustee, or a third party, who administers the trust. The trustee is a fiduciary and must act in the best interest of the beneficiary. Funds are to be distributed in accordance with the directions in the trust. The trustee will be responsible for distributing funds, following government benefit rules and requirements, and managing tax obligations, among other things.

Parents are often the trustees, although others, like siblings or close relatives, may also be trustees. Parents who are both grantor and trustee generally name a successor trustee to take over after they die, become incapacitated or resign from their role.

A person who may not be able to support themselves due to a medical condition or a disability can gain financial security from an SNT. This is one of the great values of a special needs trust.

Someone with special needs is likely to rely on means-tested government benefits, like Supplemental Security Income (SSI) or Medicaid. These benefits are only available to people with limited income or assets. Anyone receiving SSI, for example, may not have more than $2,000 of countable resources.

A parent who wishes to provide support after they die must plan in advance, so their bequest does not result in the person losing their benefits. This could happen if money is left through anything except a special needs trust. An estate planning attorney will know how to structure the parent’s estate plan to protect the individual with special needs and their government benefits.

Assets in an SNT can be used for a wide variety of expenses, including out-of-pocket medical or dental expenses, personal care givers, rehab services, education, vacations, and other permissible uses.

There is a lot of complexity involved with creating a special needs trust. For one, there are several different kinds of SNTs. You’ll want to select the one best suited for your family. Laws about means-tested benefits vary across states, so you’ll need to work with an estate planning attorney familiar with the laws of your state.

A well-drafted estate plan, incorporating a special needs trust can be of great value to the parents of a child with special needs.  It will provide your loved one with the resources to maintain as much normalcy as possible as they adjust to life without their parents. If you would like to learn more about special needs planning, please visit our previous posts. 

Reference: Forbes (Sep. 22, 2022) “Special Needs Trust (SNT): What It Is and How It Works”

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Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact Texas Trust Law to schedule a complimentary consultation.
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