Have a disabled family member who will be receiving an inheritance? Act now to protect their benefits.
A Special or Supplemental Needs Trust (SNT) is a Trust established for persons who have disabilities or receive government assistance, such as Medicaid or Social Security, which does not disqualify or prevent eligibility for such governmental benefits.
There are two different types of SNTs.
In a Third-Party Trust, any individual, other than the beneficiary, can put funds into a SNT for the supplemental and luxury needs of a person with a disability, or a person who otherwise receives governmental benefits. The beneficiary has no right to require the distribution of principal or income from the Trust, but the SNT pays for supplemental needs and luxury items that government entitlements do not provide. Such needs and items include travel arrangements, dental treatment, special cosmetic and beauty needs, and the like. A Third-Party Trust must be created by a Will.
A First-Party Trust, on the other hand, is created with the beneficiary’s own assets, and serves to protect those assets, allowing the beneficiary to receive both Medicaid and SSI benefits. Usually, this type of SNT is established when the beneficiary is awarded money as a settlement, court award of funds, or as an inheritance.
Both types of SNTs have very distinct rules of construction; therefore, it is very important to seek the advice of an experienced attorney to assist in their creation.