A "Supplemental Needs Trust", sometimes referred to as "Special Needs Trust", is a trust established for a disabled beneficiary. As long as the trustee adheres to specific distribution rules the assets held in the trust will not affect the disabled beneficiaries' eligibility for means based government programs like Medicaid and SSI. There are various types of "Supplemental Needs Trusts" including the following:
- Third party Supplemental Needs Trust
-
Self settled Supplemental Needs Trust
-
Pooled Trust or Pooled Income Trust.
-
Testamentary Supplemental Needs Trust
The estate planning or elder care planning attorneys at Lacy Katzen LLP will guide the client through this complex area of law to ensure that the needs of the disabled individual are well served.
Primary supplemental needs trust attorneys
David Anderson
Karen Schaefer
Terrance Emmens
Lisa Arrington
Third Party Supplemental Needs Trusts
A Third Party Special Needs Trust is established for the benefit of a disabled individual and will not affect that individuals' Medicaid or SSI eligibility. The funds in a Third Party Supplemental Needs Trust ("SNT") are meant to supplement, not reduce, the government benefits a disabled individual may be eligible for. Usually, a Third Party Supplemental Needs Trust is created by a parent or a grandparent using the assets of the parent or grandparent for the benefit of a disabled child or grandchild. There are payout restrictions designed to prevent a reduction or termination of government benefits including Medicaid. There is no Medicaid payback upon the death of the beneficiary in a Third Party Supplemental Needs Trust, therefore, the grantor can provide for the disposition of trust assets without restrictions.
Self-Settled Special Needs Trust
A Self-Settled Special Needs Trust is a Medicaid-exempt Trust that is funded using the disabled beneficiary's own assets. In order to qualify as an exempt Trust, the Trust document must include a payback provision providing that, upon the beneficiary's death, Medicaid will be reimbursed for benefits paid out to the beneficiary. Special Needs Trusts are designed to supplement government benefits a disabled beneficiary may be eligible for, including, but not limited to, Medicaid and SSI. In order to ensure that government benefits are not negatively affected, the trustee's authority to make distributions is limited and carefully defined. For example, direct payments to the disabled individual are typically prohibited, because this would affect SSI or Medicaid eligibility.
Often, it is desirable to have the proceeds of a medical malpractice or personal injury action placed into a Special Needs Trust. If this is the case, it is important for the personal injury attorney to work with the special needs planning attorney or elder law attorney to coordinate the funding of the Special Needs Trust. There are many issues to be dealt with, including possible Medicare and Medicaid liens.
Special Needs Trusts are a very important and useful planning tool with complicated eligibility rules, so it is important to seek the information from a Trusts and Estates attorney or an Elder Law attorney.
Pooled Trust or Pooled Income Trust
A Pooled Trust is a type of trust that is managed by a nonprofit organization and operates as a Pooled or Group Special Needs Trust.
The Pooled Trust avoids the payback for Medicaid services because, upon the death of a disabled beneficiary, the remaining funds are used to benefit the other beneficiaries of the nonprofit organization. A Pooled Trust is often used in cases where the disabled individual has no family members suitable to be Trustee of a self-settled Special Needs Trust. The nonprofit organization administrates the Trust for a small monthly fee.
Many nonprofit organizations also offer another type of Pooled Trust, which is sometimes called a Pooled Income Trust. These Trusts are useful for individuals who have excess income and are seeking eligibility for Community Medicaid homecare. The excess income, called a "spend down", can be used to pay for medical bills or, alternatively, can be put into the Pooled Trust and used to supplement the needs of the disabled beneficiary.
The rules regarding Medicaid eligibility and the use of Pooled Trusts are complex, so it is advisable to seek the advice of an Elder Law Attorney as part of the planning process.
Testamentary Supplemental Needs Trust
A testamentary Supplemental Needs Trust is a Supplemental Needs Trust established in the will of a parent, grandparent or other family member, usually for a disabled child or grandchild. The trust is funded after the death of the individual and is funded from assets in the deceased benefactor's estate. The purpose of the trust is to provide for extras for the disabled beneficiary without affecting the beneficiaries' eligibility for government benefits. Upon the death of the disabled beneficiary there is no Medicaid payback requirement; therefore, the grantor can provide for the disposition of trust assets without restrictions.
Please select a lawyer from our attorney bios page to view their specialties and qualifications, or contact us today for more information.