Special Needs Trust

What Is a Special Needs Trust?

A Special needs trust (“SNT”) is a trust designed to preserve a disabled person’s eligibility for government benefits. These include:

  • means-tested programs where eligibility is based on financial need,
    • Medicaid
    • Supplemental Security Income (“SSI”)
    • Food Stamps
  • insurance programs where eligibility is based on criteria other than financial need:
    • o Medicare
    • o Social Security Disability Income

Are There Different Types of Special Needs Trusts?

  • First party special needs trusts, either private or pooled trusts
  • Third Party Trusts

What Is a First Party Private Special Needs Trust?

The requirements for a private special needs trust are found at 42 USC§1396p(d)(4)(A) Trusts are:

  • Individual trusts drafted by an attorney
  • State specific
  • For a beneficiary under the age of 65
  • No additional funds may be added to the trust after the beneficiary is 65 years old, unless through a previously established structured settlement annuity
  • Only parent, grandparent, guardian or a court may establish such a trust
  • The trust agreement must grant Medicaid a first right of recovery against the trust assets upon the beneficiary’s death
  • The trustee must be knowledgeable enough about government benefits to protect the beneficiary’s eligibility for said benefits
  • The costs associated with drafting and establishing a private first party special needs trusts can vary depending on the facts of the case
  • Approval of the trust from Medicaid must be secured in order for the trust to be deemed a non-countable resource

What Is a Pooled Special Needs Trust?

The requirements of a pooled special needs trusts are found at 42 USC §1396p(d)(4)(C) are:

  • Trust is administered in accordance with one master trust agreement
  • The trust is administered for the benefit of individuals nationwide
  • Anyone can join a pooled trust, but Medicaid often considers joining a pooled trust after the age of 65 to be an improper transfer
  • Unlike with private special needs trusts, a disabled individual may join the trust himself/herself
  • Medicaid payback may be avoided by permitting the trust to keep the assets upon the death of the beneficiary
  • The trustee must be knowledgeable about government benefits to properly administrator the trust
  • The costs associated with joining a pooled trust are generally lower than those associated with establishing a private special needs trust
  • An individual can join and establish an account with a pooled trust in a very short period of time
  • The pooled trust trustee will secure the necessary government approval

What Is a Third Party Special Needs Trust?

A third party special needs trust is designed to preserve public benefits for an individual or family member with physical or mental disabilities. A third party (family member, friend, etc.) form and funds the created during the third party’s trust for the benefit of a disabled individual via gift or inheritance. The trust is to provide for the disabled person’s supplemental needs. The trust must be a pure discretionary spendthrift trust that grants the trustee the authority to determine if and when a distribution is appropriate and to deny a requested distribution if such a distribution could negatively impact the beneficiary’s eligibility for benefits and/or overall wellbeing. Third party special needs trusts can be testamentary (created by Will) or intervivos trusts (lifetime) and can be revocable or irrevocable. Also, and of great importance, Medicaid is not the primary beneficiary upon termination of the trust, rather the grantor can determine how the remaining trust assets are to be disbursed at the death of the beneficiary.

For over forty years, our clients have relied on Thomas E. Raines, PC to help them make prudent business, financial, and personal decisions in connection with preparation of Special Needs Trusts. If you need assistance in the area of preparation of Special Needs Trusts, please contact our Atlanta Estate Planning Lawyer at Thomas E. Raines, PC immediately at 770-263-0093 or via email through the contact portion of this website by email.

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