What is a Supplemental Needs Trust or a Special Needs Trust?

A Supplemental Needs Trust (SNT), also referred to as a special needs trust, is a legal document (an irrevocable trust) that allows assets to be held on behalf of someone with disabilities without affecting their eligibility for means-tested public benefits such as Medicaid or Supplemental Security Income. While assets held by the trust are not “countable” for the purpose of qualifying for such programs, there are strict regulations regarding disbursements. SNTs are meant to supplement the funds and services available through government programs.

What is the difference between a Supplemental Needs Trust and a Special Needs Trust?

There’s no difference. They are just different names for the same document. When special needs planning began, trusts created for people with disabilities (“individuals with special needs”) were often designated as special needs trust even though the primary purpose of the trust was to supplement the assistance provided by public benefit programs.

What is a first party SNT?

A first party, or self-settled, SNT is created with assets belonging to an individual with disabilities, who becomes the “beneficiary.” Such funds usually consist of a personal injury settlement or inheritance. The person must be under 65 at the time that the trust is established and funded. Funds remaining in the trust at the beneficiary’s death must be used to reimburse Medicaid for services to that individual before they can be distributed to anyone else.

What is a third party SNT?

A third party SNT is created with assets provided by anyone other than the beneficiary (a third party). Often third party SNTs are created by parents, grandparents or friends of the beneficiary. A third party SNT can be created and funded during the life of the person establishing the SNT or as part of their last will and testament (“testamentary”). Upon the beneficiary’s death, there is no requirement to use residual funds to reimburse Medicaid for services provided to the individual, and specific beneficiaries may be named to receive those assets.

What is a pooled Supplemental Needs Trust?

A pooled SNT is often an option usually for small estates or where it is difficult to identify a trustee. Accounts belonging to many beneficiaries are managed as a single entity, usually by nonprofit corporations. Funds remaining at the beneficiary’s death are typically divided between Medicaid and the nonprofit.

When should a Supplemental Needs Trust be used following a personal injury settlement?

If the injured party is receiving or will need means-tested public benefits such as Medicaid, Medicaid waiver programs, and/original Supplemental Security Income (SSI), a first party SNT should be considered to preserve their eligibility.

What is Supplemental Security Income (SSI)?

SSI is a Federal program funded by general tax revenues (not Social Security taxes). It provides monthly payments to meet basic needs for food, clothing, and shelter. The base monthly federal amount varies depending on your living arrangement and countable income.

Not everyone gets the same amount. You may get more if you live in a state that adds money to the federal SSI payment. You may get less if you have other income such as wages, pensions, or Social Security benefits. You may also get less if someone pays your household expenses or if you live with a spouse and he or she has income.

You may be able to get SSI if your resources are worth $2,000 or less. A couple may be able to get SSI if they have resources worth $3,000 or less.

The Supplemental Security Income (SSI) program provides monthly payments to adults and children with a disability or blindness who have income and resources below specific financial limits. SSI payments are also made to people age 65 and older without disabilities who meet the financial qualifications.

A person be eligible to receive SSI monthly payments even if you are already receiving Social Security Disability Insurance or retirement benefits.

The SSI program provides monthly payments to people who:

  • Are at least age 65 or blind or disabled.
  • Have limited income (wages, pensions, etc.).
  • Have limited resources (the things you own).
  • Are U.S. citizens, nationals of the U.S., or some noncitizens.
  • Reside in one of the 50 states, the District of Columbia, or the Northern Mariana Islands. Exception: The children of military parent(s) assigned to permanent duty outside the U.S. and certain students temporarily abroad may receive SSI payments outside the U.S.

What can the SNT funds be used for?

Conceptually, the idea is that permissible distributions from the Supplemental Needs Trust must be “supplemental” to those need-based benefits being provided by the government. Click here for a basic understanding of permissible distributions.

How can The Probate Pro assist with a Supplemental Needs Trust?

The Probate Pro regularly creates Supplement Needs Trusts (SNTs or Special Needs Trusts) for settlement of personal injury actions and inheritances for persons with special needs. If properly drafted, the funds held in a Supplemental Needs Trust will not disqualify a person with special needs from receiving these government benefits.The value in creating a Supplemental Needs Trust for a person with special needs should be obvious. Essentially, the person gets the best of both worlds…the government benefits and the benefits held in the Trust. The funds in the Trust can be used to supplement the individual’s financial needs that are not otherwise being provided by the government benefits. By properly creating, funding and managing a Supplemental Needs Trust the individual will be able to save thousands of dollars.

If you have been injured and/or are preparing to resolve a case, please give The Probate Pro call at (833) PROBATE to determine the best course of action.