What Is a Special Needs Trust?
A SNT is a legal arrangement to ensure that assets held in an account are used to support the individual with special needs and or developmental disabilities. The funds belong to the trust, and not the individual, therefore; these funds will not be taken into consideration for the eligibility for certain government benefits. A SNT is intended to supplement the government benefits.
Who Needs a Special Needs Trust?
If you’re the parent or guardian of a person who may not be able to financially support themselves due to a disability or medical condition, you should consider establishing a SNT. A trust can provide additional financial resources to a special needs individual without disrupting government resources.
Some government benefits that a person with special needs may rely on, such as SSI, Medicaid and others are “means tested,” meaning they are available only to those with limited income or assets and they often have extremely low asset limits. For example, any individual using SSI may not have more than $2,000 of countable resources.
When a parent or guardian wants to provide support after their death to a special needs person, it is crucial that the parents’ /guardians’ assets pass correctly to ensure the assets do not cause the special needs person to lose their government benefits.
Any resources left directly to the beneficiary without use of a trust could disrupt these benefits, ultimately taking money and support away from the beneficiary. The provisions to create a SNT can be incorporated in a parent’s/guardian’s revocable trust or will and do not have to be a stand-alone document.
What are the advantages of having a Special Needs Trust?
A SNT offers the following advantages:
Assets held in the SNT do not belong to the individual for whom the trust is established for. This means that funds held in the trust are not taken into consideration for determining the eligibility for receiving financial support from State and Federal programs such as: Medicaid, Medicare and Supplemental Security Income (SSI).
Funds from the trust can pay for additional care, therapies, and activities that improve the individual’s well-being.
A SNT has a trustee (a person that manages it). The trustee is responsible for making sure the funds are used properly.
The benefits of a SNT can create a meaningful financial plan that prioritizes the individual’s unique needs.
Benefits of a Special Needs Trust
A SNT plays an important role in the individual’s long-term well-being and offers several benefits.
An SNT can provide a supplemental source of income for the beneficiary while maintaining their eligibility for government programs such as Supplemental Security Income (SSI) and Medicaid.
The trust creator chooses the administrator or “trustee” of the trust. Common options include existing family members and professional trustees.
Trustees have fiduciary responsibility to act in the best interest of the beneficiary.
When Do the Benefits of a Special Needs Trust Legally End?
The benefits of a SNT can end in several situations, including:
The trust runs out of funds.
The beneficiary no longer qualifies as someone with a disability or special needs.
The beneficiary passes away.