Transcript Special Needs or Supplemental Needs Trusts

Special Needs or Supplemental
Needs Trusts
Jerry L. Basford
November 8, 2010
What is a trust?
•A trust is a legal document containing instructions
directing the management and distribution of the
resources placed in the Trust.
•Grantor-person creating or funding the trust
•Beneficiary-person receiving the benefit or on whose
behalf the trust was created.
1993 Omnibus Budget and
Reconciliation Act
Title 42 of the United States Code Section
1396(d)(4).
If the trust meets the U.S. Code requirements,
the trust is not a countable resource for SSI or
Medicaid qualification purposes.
Neither will a transfer of assets to a d(4)(A) trust
give rise to a period of ineligibility for either SSI
or Medicaid.
What is a Special Needs Trust?
a special needs trust (SNT) is a legal document
that is created for a person who, because of
physical or mental disability, or chronic or
acquired illness, at under age 65, is receiving
federal and state government benefits for
medical care and daily living needs.
What is the Purpose of a Special Needs
Trust
• Provides a source of funds without
disqualifying the beneficiary from receiving
government benefits.
– Inheritance or gifts could reduce or eliminate the
beneficiary’s eligibility for such benefits because
he or she may only have a maximum of $2,000 in
his or her own name to qualify for them.
When should a Special Needs
Trust be established?
•Generally no later than the
beneficiary’s 65th birthday.
Who can establish a Special
Needs Trust?
Three main types of SNT’s
1. Family-Type Trust
2. Pooled Trust
3. Court Ordered Trust
Family-Type Trust (Third Party
Trust)
Any third party can establish a trust, but usually the parents
provide the money to set up the trust.
The only person that cannot place money into this type of
trust is the disabled person.
Disadvantage:
the money cannot be used for housing, food, or clothing.
Pay-back provision may apply for Medicaid services
provided during the life of the beneficiary.
Pooled Trust
Anyone, including the individual with the disability can put money into a pooled
trust, however, it must be established by a non-profit association.
The trust pools the funds of many beneficiaries, manages and invests them.
Each individual has his/her own account.
Advantages:
They are willing to handle much smaller accounts than a bank or trust company
Disadvantages:
the money cannot be used for housing, food, or clothing.
Non-profit has control of the disbursements.
Any money left in the trust after the beneficiary dies stays in the trust to help
others with disabilities.
Court-Ordered Special Needs
Trust
Used in special situations where the disabled person has
inherited money or received a court settlement and that
money would otherwise disqualify them from receiving
government benefits.
Disadvantage:
Remaining funds will be used to pay back the state of
residence for whatever medical assistance the government
provided to the individual after the trust was set up.
How to fund SNT’s
Funding can come from savings, investment in
stocks, bonds, or mutual funds, Certificates of
Deposits, Individual Retirement Accounts, real
property or standard government benefits.
Family members or friends can name the trust
as a beneficiary in their will.
Special Needs Trust Funds may
not be used for basic needs
Housing, medical treatments covered
by Medicaid, food or clothing may
not be purchased with SNT’s
Allowable purchases using trust
funds
The money can be used to purchase a home, which
can then be rented to the beneficiary. The trust can
pay for furniture, medical and health costs not covered
by Medicaid, vacations, summer camp, trips, travel
companions, or other recreation or entertainment. It
can be used to buy sporting equipment, computers,
haircuts, camera, bowling shoes (but not regular
clothing), emergency legal costs, and funeral and
burial expenses.