Special Needs Trusts

A special needs trust (“SNT”) is an important part of planning if your loved one has special needs or a disability. If set up properly, a special needs trust can supplement your loved one’s needs without jeopardizing their eligibility for government benefits.

 Special needs trusts (also known as “supplemental needs trusts”) are designed to pay for things that are not covered by government benefits. Some examples include trips, fun activities, companion care, and equipment. A special needs trust can enhance your loved one’s quality of life without compromising their eligibility for benefits.

 Typically, loved ones establish a third-party special needs trust where anyone but the person with special needs or disability can add money to the trust. If you set up a special needs trust in advance, other relatives can leave money to the special needs trust by mentioning it in their own will or estate plan. Others can also add to the trust fund during their lifetime. The person who created the third-party special needs trust controls where the balance of the trust fund goes upon the death of their disabled beneficiary. Medicaid or other creditors cannot collect money from the trust fund upon the death of the disabled beneficiary. This is yet another advantage of creating a special needs trust. The leftover funds can pass to the family heirs rather than creditors.

 A first-party special needs trust, on the other hand, has to pay back Medicaid or other creditors upon the disabled beneficiary’s death. A first-party special needs trust is funded with the disabled beneficiary’s own money, like proceeds from a settlement. It is important to know the difference between a first-party and third-party special needs trust, and to not co-mingle funds.

 Some families do not have anyone else in their life who they can count on to oversee the special needs trust after the parents pass away. Professional trustees, like a bank, can be appointed to manage and oversee the special needs trust. Professional trustees are expensive and should be used as a last resort. Legacy Law will empower you with knowledge and options to make the best decision for your family.