Benefits &Financial
Special Needs Trust Planning
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Special Needs Trust (SNT) planning for a disabled person (of any age) is an effective way to provide for the person’s immediate and long-term benefit, without interrupting any “means-tested” government benefits for which he or she may be eligible, e.g. Supplemental Security Income and Medicaid. The funds in a properly drafted SNT are not considered “available” resources of the beneficiary for purposes of benefits eligibility. The SNT serves to supplement, not supplant, such government benefits, thus maximizing available resources for funding the disabled person’s ongoing needs. The term “special needs” encompasses not only medically-related items, but also many “quality of life” uses that may be tailored to reflect the abilities and preferences of the disabled beneficiary. If maintaining benefits eligibility is not a relevant factor, the SNT may serve as a primary, rather than supplemental, source of funding the disabled person’s special needs.
The SNT may be established under a Will or during life, and may be funded by a third party (e.g. a parent), or with the assets of the disabled person. SNTs may be privately administered for the lifetime benefit of one disabled person, or may be part of a “pooled” trust arrangement in which numerous disabled persons participate. A third-party SNT that is intended to maintain the beneficiary’s eligibility for government benefits, as well as any type of SNT which does not contemplate such ongoing eligibility, may direct the ultimate disposition of any trust property remaining in the trust at the death of the beneficiary, e.g. to the descendants or siblings of the beneficiary. However, a self-settled SNT (i.e. funded with the beneficiary’s own assets) must provide for the reimbursement of Medicaid at the death of the beneficiary from any property then remaining in the trust, up to the full amount of benefits previously paid on behalf of the beneficiary. Only after this pay-back requirement is fulfilled may other persons share in any remaining trust property.
Whether the beneficiary of a SNT has a normal or reduced life expectancy, the trustee retains full discretion and authority to utilize the trust funds to respond to the beneficiary’s needs, whether anticipated or unexpected, thus affording more flexibility than may be available with a structured settlement annuity. Furthermore, a SNT funded with a lump sum often produces an investment return that is superior to that of an annuity.
The administration of a SNT is highly labor-intensive, with fiduciary duties that are generally best performed by a professional trustee (e.g. a bank or trust company). Using a corporate trustee can also assure that the management of the SNT will not be interrupted by the incapacity or death of individuals who might otherwise serve as trustees. Selecting an appropriate trustee is critical to the effectiveness of the SNT, and many variables must be evaluated and considered in this regard. An attorney who specializes in drafting SNTs will also be able to address these collateral issues. The State Bar Association can help identify attorneys who are well-versed in this emerging area of law.
National Academy of Elder Law Attorneys (NAELA). 520 881-4005
Most NAELA members are also well-qualified to advise families with respect to non-elder issues. NAELA has an “experience directory” which shows which member attorneys have expertise in specific areas.
American Law Sources On-Line (ALSO) – State Bar members for all 50 states can be found under United States:(select desired State): Other Resources: Bar Association: Directory. Site also includes current and proposed state laws, contact information for many State government officials, etc.
Kristen Lewis Grice-Denzinger, Esq. practices law with Smith, Gambrell & Russell, LLP, and has extensive experience in estate planning, trusts, guardianships and advising families with “special needs” beneficiaries. She is a graduate of Wellesley College and Cornell Law School, and is an active member of numerous professional and civic organizations.